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9245
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2
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https://www.latimes.com/archives/la-xpm-1991-04-04-fi-2827-story.html
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en
|
Soviets Sharply Devalue Ruble in Move to Crush Currency Black Market
|
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[
"MICHAEL PARKS"
] |
1991-04-04T00:00:00
|
The Soviet government, attempting to wipe out the country's powerful black market, sharply devalued its currency Wednesday in one of the toughest decisions yet in its economic reform program.
|
en
|
/apple-touch-icon.png
|
Los Angeles Times
|
https://www.latimes.com/archives/la-xpm-1991-04-04-fi-2827-story.html
|
The Soviet government, attempting to wipe out the country’s powerful black market, sharply devalued its currency Wednesday in one of the toughest decisions yet in its economic reform program.
The Soviet ruble officially will still be worth $1.70 on paper. But anyone with U.S. dollars or other hard currencies will be able to buy rubles from the Soviet State Bank for less than 4 U.S. cents or the equivalent. Until now, the rate of exchange for tourists had been 17 cents per ruble.
The devaluation, part of a series of harsh measures drafted by Prime Minister Valentin S. Pavlov to pull the country out of its economic crisis, is aimed at keeping the State Bank’s tourist rate at roughly that of the black market, thus, bringing more hard currency to the state to finance imports.
If successful, the measure should also help arrest the disintegration of the Soviet economy, which has been further weakened by the ruble’s decline. Long worthless outside the country, the ruble has bought less and less even in the Soviet capital; it is increasingly ceasing to be a means of payment.
But the government decision, coming after the doubling and tripling of prices for many food and consumer goods this week, had a tremendous psychological impact for Soviet citizens who are painfully coming to understand how poor they and their country are.
“The State Bank’s measure is not a step toward making the ruble convertible,” the widely read liberal newspaper Komsomolskaya Pravda said. “It is a new trick to dig deeper into the pockets of Soviet citizens.”
With the new exchange rate, “the hard currency equivalent of the average monthly income of the Soviet citizen . . . is $12, much lower than the earnings of the poorest sections of the population, say, in poverty-stricken Papua or Mozambique,” the paper said bitterly.
Soviets going abroad on private visits under liberalized travel regulations will be able to buy only $200 in foreign currency each--at a price of 5,520 rubles, or roughly 20 months’ pay for the average worker. Emigrants will be permitted to buy only $100 in foreign currency before leaving.
Yet these limits on the amount of foreign currency that a Soviet citizen can purchase, as well as the mounting uncertainty about the country’s future, could well keep demand very strong for black market dollars--and force the government into even greater devaluations.
The new rate, officially dubbed the “auction” or “market” rate, will change twice a week after currency auctions at the Soviet State Bank, said Alexander Polyakov, a manager at the Bank for Foreign Economic Activities, the government’s foreign trade bank.
The starting rate of 27.6 rubles to the dollar was fixed after an initial auction Monday, Polyakov said, and it replaced the “tourist rate” of 5.8 rubles to the dollar, established in November, 1989, for tourists, foreigners living in the Soviet Union and Soviets needing hard currency to travel abroad.
Two other exchange rates were not immediately affected: the commercial rate of 57 cents per ruble, used for most foreign business transactions, or the official rate of 1.70 rubles to the dollar, still used in some transactions and for international statistical comparisons.
“We hope that (the black market) will start to fade,” Oleg Mozhaiskov, head of the currency department at Gosbank, told the government newspaper Izvestia. “I don’t see why Soviets and foreigners should go to dubious dealers, taking risks and sometimes even risking their lives, rather than go to the bank to sell their hard currency. After all, the rate is not too bad.”
|
||
9245
|
dbpedia
|
0
| 1
|
https://www.elibrary.imf.org/view/journals/024/1950/002/article-A002-en.xml
|
en
|
The Soviet Price System and the Ruble Exchange Rate
|
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[] |
1950-01-01T00:00:00
|
SINCE MARCH 1, 1950, there has been much discussion of the significance of the revaluation of the ruble exchange rate and the simultaneous adjustment of retail prices in the U.S.S.R. which occurred on that date. An answer to the questions which have arisen requires an analysis of the price system in the U.S.S.R. and of the meaning of the ruble exchange rate in U.S.S.R. international economic relations. This study attempts to analyze these issues and, in particular, their relation to the question of the assumption of international functions by the ruble.
|
en
|
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IMF eLibrary
|
https://www.elibrary.imf.org/view/journals/024/1950/002/article-A002-en.xml
|
Price System in the U.S.S.R.
Price formation
The economy of the U.S.S.R is a money economy. Prices are expressed in rubles, and payments by producers and consumers are made in money, although there are exceptions to this rule. As in capitalist countries, some services are provided free of charge; in the U.S.S.R., however, these services represent a larger share of consumers’ real income than in any capitalist country.
Except on “kolkhoz markets,”1 price formation is not automatic. There are price lists for all goods and for services which are not given free of charge, and transactions concluded at other than the fixed official prices are illegal.
The technique of cost calculation in individual enterprises may be similar in the U.S.S.R. to that used in capitalist countries, but the economic mechanism behind the calculation is different. There are no prices for the factors of production which may be summarized under the general term “nature,” and prices for capital are largely absent. Inequalities in average costs of production caused by differences in natural conditions, or in the skill of management, are not allowed to become a source of quasi-rent. An industrial enterprise in the U.S.S.R. consists generally of several plants, whose managers perform only technological functions. The management of the enterprise credits each plant for its output at its planned average costs (based mostly on actual past performance) plus a certain mark-up for profits, which at the most amounts to 10 per cent. The enterprise delivers the output of its plants to a central selling organization for the region at prices which result from averaging the costs and profits of the individual plants. The central selling organization, in turn, sells at prices equal to the average of costs plus profit mark-up for all enterprises in the region. Variations in these quasi-arbitrary uniform selling prices, which may be described as “delivery prices,” are usually allowed only between regions.
Demand and supply of any producers’ good in short supply are not adjusted by increasing its price above average production costs plus a mark-up for profits, but through an arbitrary reduction by the planning authorities of the quantities requested by individual enterprises (in their original “microscopic” plans). Occasionally, the central economic authorities increase the profit mark-up for individual enterprises or groups of enterprises to enable them to undertake rationalizing investments or to extend their productive capacity if they are considered to be working under specially favorable conditions and to have a skilled management. However, this is not done with the aim of adjusting effective demand to existing supply conditions.
This method of pricing is similar to that used by capitalist countries in wartime.2 It carefully avoids the marginal approach; indeed, the marginal principle is regarded in the U.S.S.R. as heretical, and Soviet economists are careful not to propose anything which appears to be influenced by it. Nevertheless, even in the Soviet economy there is some evidence of the application of the marginal principle. Each manager of a Soviet enterprise in making technological decisions is likely to act in a way that implies adherence to the marginal principle, just like an entrepreneur in a capitalist country. The factors of production of which the supply is determined for the Soviet “entrepreneur” are, however, much more numerous than for his counterpart in a capitalist country. Nor can he regulate the output of his plant in the same way as a capitalist entrepreneur. As a result of the generally narrower scope for the application of the marginal principle than in developed capitalist countries, the allocation of productive resources may be presumed to be objectively less economic in the U.S.S.R. than in such capitalist countries.
The prices of producers’ goods also include turnover taxes. But the tax rates for producers’ goods are very low, and the rates on producers’ goods which are used in the production of other producers’ goods are lower than on those which are next to the stage of consumers’ goods. The rates for a single commodity are also believed to be different, according as the commodity is to be used in the production of producers’ or consumers’ goods.
Turnover, or rather sales, tax rates on consumers’ goods, on the other hand, are very high,3 sometimes constituting as much as 90 per cent of the selling price. Even on goods which in British terminology would be called “utility goods,” they are frequently as high as 75 per cent. In 1940, the turnover tax constituted about 61 per cent of the total value of consumers’ goods sold to the public; for 1941, a percentage of 73 was planned.4
Turnover taxes are used to influence consumer demand so that it exerts little influence on the structure of production of producers’ goods. If the scales of preference of those who control economic planning differ from consumers’ preferences, the turnover tax may be used to adjust the demand for any good to an arbitrarily regulated supply. Even for goods in which the planners take no interest, but permit production in proportions regulated by consumers’ choices, producers’ interpretation of consumers’ wishes may be obscured by tax rate manipulations. Since, moreover, consumers are unable by their individual actions to determine either the rate or the volume of savings, “consumers’ sovereignty” is for the most part absent in the Soviet economy.
This method of pricing, largely independent of the marginal principle, gives the Soviet Government power to introduce, almost overnight, changes in the level of prices or in the price structure. Such over-all changes in price lists have occurred several times in Soviet history. In some instances, price adjustments had become necessary as a result of conditions created by inflation or other forms of economic mismanagement; in others, they seem to have been the inevitable outcome of the normal working of the Soviet economic organization.
Prices and economic development
The Soviet economy may be said to be in equilibrium at a given national income level and a given price level of consumers’ goods if the prices of all elements in the cost calculation have been established so as to assure equality between the value of the current production of consumers’ goods and total consumers’ outlays, which in the U.S.S.R. are almost identical with total wage earnings minus loans to the state and insignificant voluntary private savings. If—with given preference scales of consumers and of those who ultimately decide about economic planning,5 given techniques of production, and given conditions of economic and social structure—production and government expenditure expand at the same rate as population, the prices of the elements in the cost calculation and of consumers’ goods may remain unchanged. As soon, however, as either the technique of production, the economic and social structure, preference scales, or per capita production of consumers’ goods changes, cost elements and/or prices of consumers’ goods must also change.
In fact, in the U.S.S.R. national income, techniques of production, and economic structure change rather rapidly. Since the Soviet Government also aims at distributing increments in the national income so that per capita production of consumers’ goods may increase, frequent adjustments in wage earnings and other cost elements and/or in prices of consumers’ goods are therefore to be expected.
If the supply of consumers’ goods increases, equality between supply of and demand for these goods—one of the conditions of general equilibrium—may be maintained by means of a piece-work system of pay, efficiency premiums, and increases in basic wage rates. If total earnings increase in a certain period more or less than the supply of consumers’ goods, the prices of these goods should be changed. Before the war, the Soviet economy was subjected to continuous (although receding) inflationary pressures caused by imperfections in economic management, and there were frequent upward adjustments in the prices of consumers’ goods. Since the war, however, as a result of reconstruction, large imports of machinery, increasing supplies of raw materials, and improvements in the skill and organization of labor, the per capita supply of consumers’ goods has increased rapidly. At the same time, actual average costs of production have been continuously and significantly decreasing, and the cost elements, adapted to the previously existing conditions, have become more and more fictitious. In a highly centralized planning system there is, naturally, strong resistance to frequent changes in the cost elements and in the prices of consumers’ goods. It is a great convenience in planning to operate with stable “values.” In contrast to the actual tempo of economic development, the Soviet system of economic management may therefore in this respect be regarded as rigid.
Under dynamic conditions, planning which operates on values fixed in the past gradually becomes ineffective, and after a certain time, during which only sporadic and uncoordinated adjustments are made beneath the unchanged surface of fixed prices, over-all changes become necessary. Planned costs must be revised so as to reinstate economic incentives in enterprises, and wages and/or prices of consumers’ goods must be changed so as to restore equilibrium between the production of consumers’ goods and the demand for them, in conformity with whatever policy determines the share of consumption in the national income.
Since the monetary and price reform of December 1947, there have been three such major adjustments, each involving an over-all reduction in prices. The method of adjustment by increasing wages and salaries has not been used because it seemed less convenient for planning purposes. Changes in wages would seriously distort all the established elements of cost calculation.
Technique of price reduction
A description of the techniques used in the price reduction of March 1950 and of its financial implications cannot be found in the Soviet publications which are available. They may be deduced, however, from the principles of the Soviet price and financial system.
A reduction in the prices of consumers’ goods in the U.S.S.R. can be accomplished either by decreasing production costs, by lowering the turnover tax, or by a combination of the two, and either with or without a reduction in earnings.
Actual costs of production decrease gradually. As long as planned delivery prices remain unchanged, a reduction in costs results only in increased extra profits, i.e., profits above the established mark-up. An adjustment of planned costs to the actual level of costs is permitted only when the planning authorities so decide. Then if turnover taxes remain unchanged, the retail prices of consumers’ goods must be reduced in accordance with the reduction in costs of production.
The reduction of prices in the U.S.S.R. on March 1, 1950 involved an estimated average fall of 15 to 20 per cent. Under the assumption that, on the average, the turnover tax accounts for 60 per cent of retail prices, such a reduction in prices would require a reduction in total costs of production (including a mark-up for profit) by 37.5 to 50 per cent, if the yield of the turnover tax were to remain unchanged. The actual reduction in production costs is unlikely to have been of this magnitude, since there had been a reduction in prices of consumers’ goods and in costs as recently as March 1, 1949. Neither can it be assumed that the price reduction was effected solely by reducing turnover tax rates at unchanged costs of production. With unchanged costs, prices—of which 60 per cent was accounted for by turnover tax—could have been reduced by this means by 15 to 20 per cent only if it were possible to reduce turnover tax rates by 25 to 33 per cent. Such a reduction would have been either too burdensome for the state budget, or would have had to be associated with some new revenue-increasing measures, which would mean a major change in the financial system of the U.S.S.R., about which nothing has been heard. A change of this kind might be deduced if costs of production were to fall while “delivery prices” remain unchanged, the price reductions then being effected by cuts in the turnover tax rates. This would mean the legalization of extra profits in the form of increased profit mark-ups. The Soviet economic authorities, however, aim at the maintenance of rather low profit margins, to prevent managers of enterprises from relaxing their efforts to economize on expenses. (Actual costs in excess of delivery prices may cause an investigation into the work of the manager, followed by sanctions.) Since part of profits may also be used for investment in the enterprises where the profits originate, increases in profits would mean an expansion of decentralized investments with the eventual possibility of far-reaching changes in the planning system.
Actually, it seems probable that in the changes of March 1950 both techniques for reducing prices were used. Planned delivery prices were reduced and turnover tax rates cut. The application of these techniques means either an actual decrease in government revenue or an increase at a declining rate. According to the Soviet official statement, the recent cut in prices will reduce the 1950 expenditures of the population by 110 billion rubles; 80 billion will be saved through lower prices in state stores and 30 billion through price reductions on kolkhoz markets6 and in cooperative stores. This statement probably means that, if prices had remained unchanged (i.e., equal to those of 1949), the population of the U.S.S.R. would have spent in 1950 from their money incomes, increased according to plan, 110 billion rubles more than at the reduced price level. The 80 billion rubles “lost” by state stores would represent 18 per cent of the total revenue planned in the 1949 budget. Even on the assumption that the increase in the national income (at 1949 prices) for 1950 were 20 per cent, and that—if prices had remained at the 1949 level—the percentage increase for state revenue were the same as for the national income, the reduction in anticipated revenue that would be necessary if the price reduction had been only at the expense of current government proceeds would be so large as to be very unlikely. Any increase in the national income is usually divided between consumption and investment (the latter is financed mostly by the state budget) in such a way as to ensure a significant increase in investment, greater than the increase in consumption. The increase in the national income of 1950 would have to be very large if government revenues and, consequently, also investment were to increase significantly, in spite of a cut in the rate of increase in government revenues so severe that, if it had been applied in 1949, actual revenues would have fallen by almost one fifth.
This seems to suggest that the reduction in prices may have been made possible in part by a revision in workers’ efficiency rates, basic wage rates probably remaining unchanged. Sporadic revisions of this kind are possible in view of changes in methods of production (e.g., increases in capital equipment) which increase the efficiency of labor.
However, insofar as the reduction in retail prices was achieved through a cut in turnover tax, it was probably carried out at the expense not only of current budgetary revenues, but also of the revenues of the previous year (1949). Inventories were probably gradually accumulated before prices were reduced (which implies a relative reduction in government revenues during the period of accumulation and also a volume of production in excess of current sales to the public). The expansion in consumers’ demand in response to reduced prices may be satisfied by a gradual depletion of inventories until current production increases sufficiently. In view of these considerations, it seems possible that the reduction of prices may have been achieved without any significant reduction in the earnings of the population.
The relative importance, in practice, of these techniques for reducing prices cannot be evaluated. However, it may be assumed that the combined effect of increased national income and reduced prices will be an increase both in real per capita consumption (although probably not to the full extent of the price reduction) and in government revenue and investment.
The reduction of prices of consumers’ goods by various percentages (necessarily arbitrarily selected, although an analysis of the market certainly preceded this action) will cause shifts in demand. Further price adjustments, covering a wide range of goods, are therefore to be expected. The reduced prices, however, may have been set at such a level that the aggregate value of consumers’ goods available (after previously accumulated extra inventories have been sold) will for some time be smaller than the amount of money which consumers would be willing to spend on consumption goods during the same period. This would have effects similar to those of an inflation. In such a case, the necessity of adjusting prices to consumers’ preference scales (while the general price level remained unchanged) would be less strongly felt, since under inflationary conditions almost any combination of goods can be sold easily, even though relative prices are not correctly fixed.7
Price spread
As pointed out above, costs of production under the Soviet pricing system do not include rent or interest, and in industries producing capital goods they include only small profits (compared with those which would be considered as normal in capitalist countries). What is not included by state enterprises in the costs of production is collected by the state in the form of high turnover taxes on consumers’ goods. Turnover taxes are also a means by which the quantity of consumers’ goods which is demanded is made equal to the quantity supplied. The volume of output of consumers’ goods is set by the central planning authorities, and may be safely assumed to be smaller than would be produced if a fair degree of consumers’ sovereignty existed in the Soviet Union. Turnover taxes are therefore a means of collecting a significant part of state corporate savings, which correspond to investments decided by the planning authorities.
The result of this pricing system is a larger discrepancy than is usual in capitalist countries between the delivery prices of all goods—which roughly correspond to wholesale prices charged by producers in capitalist countries—and the retail prices of consumers’ goods. For example, for bread this discrepancy amounted before the war to about 75 per cent of the retail price, which is probably more than the difference between the producers’ price and the retail price in any capitalist country. In comparison with the situation in capitalist countries, there are, therefore, in the U.S.S.R. one group of goods which are relatively “cheap” and another which are relatively “expensive.” To the relatively “cheap” category belong all producers’ goods and consumers’ goods at delivery prices, while to the relatively “expensive” group belong all consumers’ goods at the retail stage of distribution. The difference between the price levels of these two groups of goods may be called the relative price spread or, more briefly, the price spread.
The relative price spread in the U.S.S.R., in comparison with, say, the United States, indicates the extent to which the difference in the Soviet Union between the wholesale (delivery price in the U.S.S.R. and wholesale factory price in the U. S.) and retail prices of representative baskets of goods and services is greater than in the United States. If prices of baskets of “cheap” goods in the United States and the U.S.S.R. are denominated “Aa” and “Ar,” respectively, and prices of “expensive” goods “Ba” and “Br,” the following formula may be used for measuring the relative price spread in percentage terms:
100 - ( Ar Br : Aa Ba ) 100
It is, however, always possible to assume a hypothetical exchange rate for the Soviet currency which will make Aa equal to Ar. The formula for the relative price spread then becomes
100 ( Br - Ba ) Br
A comparison of the price situations in capitalist countries may also reveal the existence of relative price spreads there. Differences in taxation, in social insurance systems, and in customs duties, may create price spreads for various groups of goods and services, and restrictions on the mobility of factors of production and monopolies help to maintain these spreads.8 These spreads, together with the effects of differences in natural resources, may make one country “cheap” or “expensive,” depending on the groups of goods used for comparison, and thus affect the commodity composition of exports and imports. However, such price spreads as exist between capitalist countries are not nearly so extensive as in the U.S.S.R.
The formula suggested above cannot in practice be used to calculate the actual price spread in the U.S.S.R.—e.g., in comparison with the United States—since information on prices in the U.S.S.R. for the “A” group of goods is lacking, and on prices of the “B” group of goods is very limited. The price spread may, however, be estimated indirectly. The turnover tax content in the retail prices of consumers’ goods is known to have been 61 per cent in 1940 and to have been planned at 63 per cent for 1949. It may be assumed to amount to 60 per cent at present. The remaining 40 per cent represents delivery prices plus costs of distribution. If costs of distribution in the U.S.S.R. represent the same percentage of delivery or wholesale factory prices as in the United States, the price spread in the U.S.S.R. relative to the United States would correspond to the turnover tax content in the aggregate value of consumers’ goods. In fact, although the bureaucratic distribution apparatus of the U.S.S.R. works clumsily, the distribution costs in the Soviet Union may be relatively lower than in the United States, because profits of trading organizations are set very low. There are, moreover, in the United States, some price-increasing taxes which correspond to part of the 60 per cent turnover tax content in the Soviet prices of consumers’ goods. The relative price spread may therefore be assumed to be somewhat less than 60 per cent.
Under the conditions of a market economy, an estimate such as that made above would be fairly representative of the price spread for all goods of category “A.” But in the U.S.S.R. the price mechanism does not fulfill its traditional function; the allocation of factors of production between the industries producing capital goods and those producing consumers’ goods is not motivated by relative profitableness. It is, therefore, possible for the price spread for capital goods to differ significantly from that for consumers’ goods, and there seems to be convincing evidence that this is actually the case. Profits in industries producing capital goods are set at a much lower level than profits in industries producing consumers’ goods, the labor assigned to the former group of industries is generally better trained, and the machinery used there is more extensive and modern. Consequently, the price spread between capital goods and raw materials at the “delivery” stage and consumers’ goods at the retail stage may be larger than that between consumers’ goods at the “delivery” and the retail stages.
Meaning of the Exchange Rate of the Ruble
Exchange rate and the price spread
In order to interpret the real meaning of the ruble exchange rate in its relation to the Soviet price system, let the assumption first be made that the Soviet authorities make decisions concerning international transactions on the basis of existing domestic and foreign prices, as is done in free competitive economies.
In free competitive economies, the difference between wholesale and retail prices does not vary very much from country to country; in other words, any relative price spread that may exist cannot be of great significance. If an exchange rate is allowed to have its full effect upon foreign trade transactions (i.e., without direct or indirect premiums or surcharges), this in itself tends to limit the size of any price spreads. And, in turn, if price spreads are small, this facilitates the use of single exchange rates in economic relations with other countries. The relative price spread for the U.S.S.R., however, is large, and this has a direct bearing on the foreign value of the Soviet currency.
Soviet merchandise exports and imports are composed of goods of “A” price category. Even consumers’ goods are sold to export organizations at delivery prices. Therefore, if prices are to be used as a guide in the decisions of the Soviet foreign trade organizations, the exchange rate used in foreign trade transactions would have to conform to the “A” price level. A similar assumption applied to consumers’ goods and services sold to foreigners inside the U.S.S.R. would mean that the exchange rate applied to foreign travellers, businessmen, and diplomats should conform to the “B” price level. Because of the price spread discussed in the preceding section, these two exchange rates cannot be identical. As long as the present system of pricing is maintained in the U.S.S.R., and on the assumption that exchange rates should conform to domestic and foreign prices, there should therefore be two exchange rates for the ruble.
The realization that no single exchange rate can fully indicate the relationship between the values of the Soviet and other currencies is of great significance for many comparisons between Soviet and capitalist economic magnitudes. Economists sometimes use prices of consumers’ goods for estimating the proper exchange rates of various countries. Because there are no significant relative price spreads among those capitalist countries which do not have extensive economic controls, the exchange rate thus estimated may approximately represent the price relations of all goods in such countries. Such an exchange rate, however, would not be proper for an estimate of, for example, the dollar value of the budgetary investment appropriations in the Soviet Union. Estimates and analyses of the national income of the U.S.S.R. may also lead to erroneous conclusions if the peculiarity of the Soviet economic system discussed above is not taken into account.
On the assumption that the decisions of Soviet authorities concerning international transactions are based on existing domestic and foreign prices, and that there are generally favorable conditions for the development both of exports and of tourism, the existence of a single ruble exchange rate would result in smaller foreign exchange proceeds than if there were two exchange rates (or three, if the relative price spread between prices of capital goods and delivery prices of consumers’ goods is significant).
In fact, after July 1, 1950 there was to be only one exchange rate for the Soviet currency, 4 rubles to 1 U. S. dollar. Until June 30,1950, there were two exchange rates: one official, 4 rubles per U. S. dollar, which followed from a declared gold content of the ruble, and the other preferential, 6 rubles per U. S. dollar, which was called the “diplomatic” exchange rate. The existence of two exchange rates, however, did not necessarily mean that there was conformity between exchange rates and prices in the U.S.S.R. and abroad; nor did it prove that decisions concerning individual international transactions were based on prices in the U.S.S.R. and abroad. Even an approximate conformity between exchange rates and price levels in the U.S.S.R. and abroad could merely suggest, but not prove, that exchange rates were actually applied to Soviet individual international transactions. There was, in fact, no such conformity; and there is no conformity between the present single exchange rate of the ruble and the price levels of either “A” or “B” groups of goods. This will be shown in the last section of this paper. In the present section, only the problem of the conformity between exchange rates and prices in individual transactions will be discussed.
The relevance of the exchange rate
Foreign trade in the U.S.S.R. is a state monopoly. Its purpose, apart from the achievement of the highest possible prices for exports and the lowest possible prices for imports,9 is, as has been explicitly stated by those responsible for Soviet economic policy, to shield the domestic economy from external influences.
Foreign trade organizations buy in the domestic market goods destined (by the economic plan) for export, and sell imported commodities to Soviet enterprises at domestic delivery prices. (The prices of imported goods may be set more arbitrarily by import organizations, since in many cases they are very imperfect substitutes for goods produced domestically.) Export goods are sold and import goods bought by the trade organization at the prices prevailing in foreign markets. Prices in trade with other member countries of the Council of Mutual Economic Assistance10 deviate from world market prices because of adjustments for differences in transportation costs, etc. They are probably also influenced by the comparative bargaining powers of the parties to a trade agreement.
The ruble exchange rate is of no interest to Soviet domestic producers (i.e., those who sell goods destined for export to exporting organizations), to final purchasers of imported goods, or to foreign exporters and importers. Transactions between foreign exporters and importers and Soviet specialized foreign trade organizations are settled in foreign currencies (or in some abstract unit of value), and transactions between Soviet foreign trade organizations and Soviet suppliers or purchasers of exported or imported goods in rubles. No explicit exchange rate is used.
In view of the method of price formation in the U.S.S.R. and of the fact that domestic prices are “shielded” from outside influences, any resemblance between the price patterns in the U.S.S.R. and in other countries could be nothing more than a sheer coincidence. Therefore, if a uniform exchange rate were applied to foreign trade transactions, carried out according to a plan constructed independently of domestic prices, some exporting and importing enterprises would make extra profits while others would suffer losses. The exchange rates actually involved are, therefore, only implicit and necessarily multiple, and, in the management of the Soviet economy, are of no significance. The exchange rate is, in fact, irrelevant in foreign trade transactions. It in no way serves as a guide in making foreign trade decisions. If it were to be used for this purpose, it would have to be a price, which the ruble exchange rate is not.
The only use of the official exchange rate in the U.S.S.R. is to convert foreign exchange reserves into rubles in order to make them an item formally comparable with other items in the balance sheet of the State Bank. But since the official exchange rate does not represent an average value of the ruble (as will be shown in the next section), the ruble values of foreign exchange obtained in this way cannot serve any planning purpose. It is doubtful whether even an exchange rate which conformed to the “A” price level could serve a planning purpose, because the distortion of prices would mean that any shift in the commodity composition of exports or imports would cause changes in the value of the ruble.
A comparison of foreign trade balances expressed in terms of a foreign currency and in rubles may provide a limited substitute for the guidance functions of the exchange rate. U.S.S.R. foreign trade may be balanced in terms of rubles and at the same time unbalanced in terms of foreign exchange, or vice versa. A comparison of these balances might reveal fiscal ruble losses or profits. Where accounts are unbalanced in terms both of foreign exchange and of rubles, a formula may be devised for calculating the fiscal results of foreign trade transactions.
If there are to be neither gains nor losses, the following condition must be fulfilled: IrId=ErEd; where “Ir,” “Er” are the ruble values of imports and exports, and “Id” and “Ed” the dollar values of imports and exports, respectively. This condition means that the average implicit exchange rate for imports is equal to that for exports. If it is not fulfilled, the difference between the actual ruble value of imports and the hypothetical dollar value which would give a zero fiscal profit, Ir-IdErEd, or a similar difference computed for exports, IrEdId-Er, shows the range in terms of rubles of the fiscal profits or losses. If exports and imports in terms of dollars are equal, both formulae reduce to Ir—Er.
Such calculations may be applied for the purpose of choosing the goods to be exported or imported. In order to eliminate or diminish fiscal losses, or to obtain fiscal profits, the commodity composition of exports and imports should be set so as to maximize the implicit exchange rate of the ruble. In fact, however, shifts in the commodity composition of Soviet foreign trade are determined by the requirements of Soviet economic plans for production and consumption, and appear not to be influenced by any consideration of this kind.
While the official exchange rate of the ruble is irrelevant in foreign trade transactions, it is relevant in transactions with foreigners who purchase consumers’ goods and services inside the U.S.S.R. at retail prices and pay in rubles. The scope of transactions in which the exchange rate is relevant might be widened or narrowed. For example, it might be made relevant in payments for transit charges, if these had to be made in rubles according to domestic tariffs, or its relevance might be limited by organizing special stores for diplomats, where payments were required in foreign exchange. It is, however, difficult to imagine any practical policy which would completely eliminate the relevancy of the exchange rate.
Since the official ruble exchange rate is irrelevant for foreign trade purposes, i.e., in transactions in goods of “A” price category, but is relevant in transactions in goods of “B” price category, it should be expected to conform to the “B” price level.
Significance of the Revaluation of the Ruble
Revaluation of the ruble
On February 28, the Council of Ministers of the U.S.S.R. announced the revaluation of the Soviet ruble and, as indicated above, a reduction of retail prices of important consumers’ goods, effective March 1, 1950. The value of the ruble used in accounts for foreign trade transactions was fixed at 0.222168 grams of fine gold, which corresponds to a price for fine gold of 4.5011 rubles per gram. The exchange rate of the ruble was accordingly changed from 5.30 to 4 rubles to the U.S. dollar, a revaluation of 32.5 per cent.11 The preferential diplomatic exchange rate was changed from 8 to 6 rubles to the U.S. dollar, a revaluation of one third. As of July 1, 1950, the preferential diplomatic rate was abolished.
By tying the ruble to gold, the Soviet Government discontinued the practice established in 1937 of calculating exchange rates in terms of other currencies on a dollar basis: “In the event of further changes in the gold content of foreign currencies or in their exchange rates, the State Bank of the U.S.S.R. shall alter the foreign exchange rate of the ruble correspondingly.”12
The revaluation of the ruble was justified, according to the official statement, by three reductions of prices of consumers’ goods in the U.S.S.R. since the monetary reform of 1947, and by the increase of prices in Western countries.13 This “resulted in … strengthening of the ruble, increasing its purchasing power, so that it is now 14 higher than its official exchange rate.”15
“Internationalization” of the ruble
Since under the present price and foreign trade system of the U.S.S.R. the exchange rate of the ruble has been irrelevant for foreign trade transaction purposes, the opinion of the Soviet Government that the rate should conform to relative price levels, and its decision to change the rate, may suggest that the Soviet Government intends to give the ruble some new important functions in its foreign trade.
The Soviet Union has ceased, since 1949, to observe strictly the long-established rule of expressing foreign trade agreements in terms of foreign exchange, mostly in U.S. dollars. The values of goods to be exchanged were expressed in rubles in a few of the agreements concluded in 1949 with Eastern European countries. Also, after the ruble revaluation of February 28, 1950, Poland published her 1949 foreign trade statistics in terms of the new ruble, instead of in U.S. dollars, as had previously been customary. This development may seem to indicate that the U.S.S.R. intends, in its trade transactions, to replace the U.S. dollar with the ruble, and to create a ruble bloc in Eastern Europe, possibly with a multilateral system of settlement.
If the ruble were to replace the U.S. dollar in Eastern European trade, it would have to fulfill the same functions that are now performed by the dollar. (This would be a necessary but not a sufficient condition for the ruble to become an international currency.) At present the U.S. dollar is used by member countries of the Council of Mutual Economic Assistance in quoting prices and values in international trade and for reserve purposes. In fulfilling the first function, however, it expresses approximately world market prices, and not the prices actually prevailing in the U.S.S.R. and in other Eastern European countries. The importance of the dollar as an element in monetary reserves is very limited: trade under bilateral agreements is usually balanced, and temporary export surpluses represent an accumulation of “clearing dollars,” which can be converted into goods only within specified commodity lists at negotiated prices. The dollar performs a reserve function in the full sense only for the final export surpluses which, according to some agreements, must be paid in U.S. dollars. But even in this case, this function is performed only because dollars are convertible into goods in countries outside Eastern Europe and are therefore acceptable by any Eastern European country.
For the ruble to fulfill the functions at present performed by the U.S. dollar, it must be made acceptable in payments for final trade surpluses, and indeed if trade within the Eastern European countries is to be multilateralized, it must be made acceptable for that purpose to a larger extent than is the U.S. dollar at present in that area. This requirement might be satisfied in two ways.
First, the prices used for foreign trade purposes might still be world market prices, while Eastern European countries would be supplied with the amounts of rubles convertible into U.S. dollars (or any other Western currency) needed to cover their import surpluses in trade with the West, which for all practical purposes would be equivalent to the convertibility of rubles into gold. This solution, although it probably would contribute to the multilateralization of trade, would not in fact replace the U.S. dollar with the Soviet currency. The ruble supplied to Eastern European countries by the U.S.S.R. would not be the ruble circulating in the Soviet Union. As long as the valuation of goods exchanged was based on world market prices, it would in fact be only the U.S. dollar or some other currency, to which the name of ruble would be given while it was being used in Eastern Europe. Such a solution may be called a nominal substitution of the ruble for the U.S. dollar.
Alternatively—and this is the only way by which the Soviet currency could actually be made a substitute for the U.S. dollar in its economic functions—the ruble might be made directly convertible (within the conditions of the trade agreements) into goods at the delivery prices prevailing in the U.S.S.R. and in other member countries of the Council of Mutual Economic Assistance. This would mean that the ruble exchange rate would become relevant in foreign trade transactions, and would perform the function of guidance normal to an exchange rate. If this condition were fulfilled, the ruble would cease to be a purely domestic currency and, under favorable technical conditions, might come to be used in international transactions, not only inside the U.S.S.R. but also by other countries.
The new exchange rate and the price level
The March 1950 revaluation of the Soviet currency could be regarded as a preliminary step toward internationalization of the ruble, only if the exchange rate of 4 rubles to the U.S. dollar then established were to correspond approximately to the “A” price level in the U.S.S.R. Such an exchange rate would facilitate the changes in price patterns which are necessary if the exchange rate of the ruble is to perform guidance functions and become a relevant factor in international trade.
The lack of data on wholesale prices in the U.S.S.R. does not permit any precise estimate of the ruble exchange rate which would conform to the “A” price level in the U.S.S.R. and to general price levels in Western countries. On the basis of limited data on the prices of consumers’ goods, the exchange rate which corresponds to the purchasing power of the ruble, measured in terms of prices of “B” goods, may, however, be roughly estimated at about 25 rubles to the U.S. dollar. The value of the ruble measured by reference to the cost of living is greater because of the importance in the U.S.S.R. of relatively inexpensive services, e.g., rents, and may be estimated at about 20 rubles to the U.S. dollar. If the relative price spread in the U.S.S.R. amounts to 60 per cent, the average exchange rate based on “A” prices, calculated on the basis of the simplified formula, would be around 10 rubles to the U.S. dollar, with the rate appropriate for capital goods perhaps somewhat higher. On this hypothesis, the ruble seems, at the present exchange rate of 4 to the dollar, to be overvalued by about 150 per cent. If the price spread in the U.S.S.R. is assumed to have been estimated with sufficient accuracy, the present exchange rate is thus too high to represent even approximately the relation between average domestic Soviet prices of “A” goods and wholesale prices in Western countries.
It might be argued that the present ruble exchange rate has been established because it corresponds to the prices and exchange rates of the members of the Council of Mutual Economic Assistance, which account for about two thirds of the total “commercial” foreign trade16 of the U.S.S.R. If this were so, the currencies of the Eastern European countries, in relation to Western currencies, would also be overvalued by about as much as the ruble.
The exchange rates of at least three countries, Czechoslovakia, Hungary, and Poland, which account for the greater part of Eastern European trade with the U.S.S.R., probably correspond approximately to their “B” price levels, and in any case are not overvalued by 150 per cent. To ascertain how far the present ruble exchange rate corresponds to Eastern European prices and exchange rates, however, rates corresponding to “A” price levels should be compared. Since such exchange rates do not exist in these countries, the Soviet Government cannot have been motivated in its decision to revalue the ruble by a desire to adjust it to Eastern European exchange rates.
It may be concluded that, at the present exchange rate, the ruble is seriously overvalued in comparison with any currency of importance to the U.S.S.R., and that it does not represent even approximately the “A” price level purchasing power parity.
Conditions for relevance of the exchange rate
Even if the present ruble exchange rate corresponded approximately to the relation between “A” price levels in the U.S.S.R. and in Eastern European countries and wholesale price levels in Western countries, this would not be a sufficient condition for the internationalization of the ruble. A further condition would also have to be fulfilled: national exchange rates would have to be made relevant in international trade transactions. Only then, under favorable technical circumstances and arrangements, might the ruble become an international currency. This condition has not so far been fulfilled in the U.S.S.R. or in the Eastern European countries which are members of the Council of Mutual Economic Assistance.
If internationalization of the ruble is to be achieved on a world scale, Soviet domestic prices in foreign trade transactions would have to be adjusted to Western price patterns, in order to make them relevant for foreign trade transactions. Western price patterns could be influenced only insignificantly by the U.S.S.R., through changes in the volume or the commodity composition of its trade. The changes which would be necessary in Soviet domestic price patterns, and possibly also in its taxation system17 would, however, be far-reaching. That this would be the aim of the Soviet Government is improbable. It would involve radical changes in economic planning, and for that matter in the whole economic system of the U.S.S.R., and is in any event impossible on ideological grounds. The Soviet economic system and its technical methods of economic management are considered by the Soviet authorities to be superior to any other, and the conviction that the acceptance of external influences would impair the purity of socialist principles, as interpreted by the Communist Party, is deeply rooted in Soviet minds.
It might be argued, however, that internationalization of the ruble may be feasible if limited to the U.S.S.R. and other members of the Council of Mutual Economic Assistance (possibly including Eastern Germany and China). This, it might be maintained, is possible, since Eastern European prices could be adjusted to Soviet patterns by governmental administrative action. An Eastern European clearing union could then be created and a certain degree of multilateralization achieved.
Such a unification, however, would require the members of the Eastern European Clearing Union to have two different standards of value for foreign trade: one for partners in the Union and the other for the outside world. The first would be based on Union price patterns, the latter on the U.S. dollar and other Western currencies. It is doubtful whether such a system would represent any simplification, compared with the present one.
In any event, such unification would not be consistent with the present economic doctrine and management of the U.S.S.R. The system of pricing (as distinct from the price pattern which results from the pricing system) applied in the U.S.S.R. is regarded there as the ultimate perfection of economic calculus and is gradually being accepted by other Eastern European countries. Because of differences in basic economic facts, the price patterns which will emerge in Eastern European countries after the Soviet pricing methods have been introduced could, however, be similar to those in the U.S.S.R. only by accident. There are significant differences in the patterns of prices of labor. Therefore, if goods moving in intra-Eastern European trade were to be priced according to the Soviet price pattern, this could not be done by a thoroughgoing application of the Soviet pricing methods in other Eastern European countries. Either the Soviet price pattern or the Soviet pricing methods may be accepted by Eastern European countries. Both cannot be maintained at the same time. The fact that the Eastern European members of the Council of Mutual Economic Assistance are introducing the Soviet pricing methods seems to rule out the possibility, at least for the time being, of a unification of prices.
Therefore, of all the characteristics of an international currency, only the purely technical condition that the ruble shall be related to national currencies through exchange rates can be and is fulfilled. This in itself, without fulfillment of the condition that exchange rates shall be relevant, gives the ruble only the appearance of an international standard of value, and may satisfy only the requirements of prestige. Prices in trade agreements may be expressed in rubles, but these prices will either be agreed arbitrarily or will represent only translations from the prices of Western capitalist countries.
Since it can hardly be expected that the Soviet pricing methods will be changed in the foreseeable future, any spectacular moves of the U.S.S.R. affecting foreign trade and exchange, similar to the latest revaluation of the ruble, would at most mean only an approach to the nominal substitution of the ruble for the U.S. dollar. There is no doubt that the Soviet Union is gradually consolidating the economies of Eastern European members of the Council of Mutual Economic Assistance, and that foreign trade is one of the main instruments of this policy. But it seems evident that this will involve only a consolidation of planning, the pooling of commodities and specialization of production, and that currency considerations will play no active part in it.
Diplomatic exchange rate
Since under the present price patterns in the U.S.S.R. the exchange rate of the ruble must continue to be irrelevant, an improvement in the terms of trade of the U.S.S.R. in relation to Eastern European countries could not have been the aim of the revaluation of the ruble. The terms of trade were, however, improved in relation to all countries by the revaluation of the diplomatic exchange rate. The Soviet Government does not intend to increase its foreign exchange proceeds from tourists, diplomats, etc., and, therefore, could afford to revalue the diplomatic ruble, although it was already greatly overvalued. It is possible, however, that the demand for rubles at the diplomatic exchange rate is already so inelastic that this revaluation will in fact slightly increase total foreign exchange proceeds. At the same time, the revaluation of the ruble may decrease the expenditures of Soviet representatives in Eastern European countries and in Eastern Germany, and reduce the costs of all services bought by them in these countries, which are not covered by clearing trade agreements.
June 1950
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https://www.nytimes.com/2022/03/09/business/russia-ruble-central-bank.html
|
en
|
Russia’s Ruble Continues to Slide on Foreign Currency Restrictions
|
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] | null |
[
"Eshe Nelson"
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2022-03-09T00:00:00
|
As the currency loses purchasing power, Russia’s central bank is trying to support the ruble with expanded rules preventing exchanges into dollars.
|
en
|
/vi-assets/static-assets/favicon-d2483f10ef688e6f89e23806b9700298.ico
|
https://www.nytimes.com/2022/03/09/business/russia-ruble-central-bank.html
|
Russia's currency continued its descent on Wednesday as trading in the ruble was restarted on the Moscow Exchange. But in an effort to stanch the currency’s decline, the Russian central bank issued an order further restricting access to U.S. dollars.
The Central Bank of Russia said on Wednesday that owners of foreign-currency accounts in Russian banks would be allowed to withdraw only up to $10,000 in dollars (regardless of the currency in the account), and that the rest would have to be taken out in rubles. New foreign-currency accounts can be opened, but only rubles will be permitted to be withdrawn. The order will be in place until Sept. 9, the central bank said. Until then, banks cannot sell foreign currency to Russians, either.
The measures seem intended to curb the ability of Russian citizens to convert their rubles into dollars or other currencies, as the central bank tries to support the national currency, which is rapidly losing its purchasing power.
Russia’s ruble has lost about 40 percent of its value against the U.S. dollar this year as Western leaders have moved to isolate the country from the global economy with sanctions in response to its invasion of Ukraine. Those moves, which include the freezing of Russian central bank assets that are held in the United States, will make it harder for the country to prop up its currency.
Since currency trading on the Moscow Exchange was halted on Friday, the United States and Britain said they would stop importing Russian oil, while the European Union laid out a plan to reduce its dependency on Russian energy, and Fitch Ratings said a default on Russia’s sovereign debt was “imminent.”
“The further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective nonpayment of its sovereign debt obligations,” Fitch Ratings said on Tuesday.
The ruble was trading at 117 to the U.S. dollar in Russia on Wednesday, after closing at 105 rubles to the U.S. dollar on Friday. Trading in rubles in global currency markets, which was very limited, priced the ruble at about 139 to the U.S. dollar.
Trading on the Moscow stock market is still halted, the central bank said. It last traded on Feb. 25.
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https://www.geeksforgeeks.org/currency-of-russia-russian-ruble/
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en
|
Russian Ruble - GeeksforGeeks
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A Computer Science portal for geeks. It contains well written, well thought and well explained computer science and programming articles, quizzes and practice/competitive programming/company interview Questions.
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en
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GeeksforGeeks
|
https://www.geeksforgeeks.org/currency-of-russia-russian-ruble/
|
The Russian ruble is the currency of Russia. The ruble has served as the currency of the Russian Empire and the Soviet Union before that. The moniker “ruble” is currently formally used in only three countries: Russia, Belarus, and Transnistria. As of April 2019, the ruble is the world’s 17th most traded and free-floating currency.
What is the RUB (Russian Ruble)?
The ruble is the official currency of Russia. There are only two other currencies older than the ruble, and both are still in use. There are 100 kopeks in each unit. The ruble is the currency of the Russian Federation. It is second only to the British pound in terms of the world’s oldest currency, in use since the 13th century. Russia’s ruble fluctuates in value in tandem with global oil prices due to the country’s status as a major producer and exporter of both.1 Russian ruble value is around 0.017 United States dollars. In India, the Russian ruble value is around 1.30 Indian Rupee (as of May 2022).
History of the Russian Ruble:
Russia’s currency, the ruble, has been in use since the 13th century and has undergone numerous changes, including revaluations and devaluations. Before the dissolution of the Soviet Union in 1992, the currency’s symbol was SUR, and it remained RUR until the redenomination of 1998. After the redenomination in 1998, one new ruble was equivalent to 1000 old rubles. The Russian ruble’s exchange rate has generally measured global commodity prices in recent years, particularly the price of oil. In the second half of 2014, the ruble lost more than half of its value against the dollar as oil prices fell worldwide. Sanctions have been imposed in the form of money and other resources.
The Economy of Russia:
Russia is larger than the 48 contiguous states of the United States combined, and it is endowed with an abundance of natural resources. Russia’s GDP ranked 11th in the world in 2020, but it was only 7 percent of the size of the US economy. This is due to Russia’s heavy reliance on natural resource exports rather than higher-value-added industries. Russia’s GDP lags far behind that of countries of a similar size, such as Italy and France. The ongoing political tensions in Russia, combined with sanctions imposed by the international community, have had a negative impact on the country’s economy following the beginning of Russia’s invasion of Ukraine in February 2022. The value of the ruble and many Russian companies both began to decline.
Conclusion:
During both the Russian Empire and the Soviet Union, the ruble served as the country’s currency (the Soviet ruble). The Russian ruble is used informally as well. Russia, Belarus, and Transnistria are the only three countries that use the same currency. Many of Ukraine’s seized regions, the Crimean Peninsula, Donetsk, and Luhansk PPR, as well as the Georgian regions of Abkhazia and South Ossetia, use Russian rubles informally. With the ruble trading at a free-floating rate in April 2019, the Russian ruble value has become the world’s seventeenth most widely used currency.
|
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9245
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0
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https://www.rferl.org/a/russia-plunging-ruble-crisis-confidence-policy-ukraine-war/32551217.html
|
en
|
'Crisis Of Confidence': Ruble's Plunge Prompts Policy Clash In Russia As Costly War Drags On
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2023-08-16T19:20:58+00:00
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The ruble has been falling as Russia’s war on Ukraine drags on with no sign that Moscow intends to pull back. While there are underlying causes such as shrinking net exports, some experts also see a ‘crisis of confidence’ in the currency and its plunge has set off a tug-of-war over economic policy.
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en
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/Content/responsive/RFE/img/webApp/favicon.svg
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RadioFreeEurope/RadioLiberty
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https://www.rferl.org/a/russia-plunging-ruble-crisis-confidence-policy-ukraine-war/32551217.html
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When Russia’s central bank surprised economists on July 21 by hiking interest rates a full percentage point, double the expected increase, it should have buoyed the ruble -- which had been on a downward trajectory since December.
Yet the Russian currency continued to tumble against the U.S. dollar the following three weeks, breaching the important psychological level of 100 on August 14 and prompting a whopping 3.5 percentage point emergency rate hike the following day, to 12 percent.
The latest slide in the ruble comes even as Russian oil, its main source of foreign currency revenue, is fetching higher prices. Higher oil prices and a stronger ruble have often gone hand in hand, but not this time: Russia’s invasion of Ukraine has warped the country’s own economy, laying land mines for the currency.
“There is a crisis of confidence in the ruble,” Sergei Aleksashenko, a former Russian central bank chief who is now a vocal Kremlin critic, said in a tweet following the August 15 rate hike. He predicted rate increases would have little impact on the currency.
The ruble’s monthslong decline comes against the backdrop of the grinding war in Ukraine, where Russia’s forces have made few gains since the first months after the full-scale invasion in February 2022 and are facing a Ukrainian counteroffensive in both the east and south.
That fierce Ukrainian resistance is forcing Russia to ramp up military spending as Western sanctions crimp energy export revenue, creating a large budget deficit that is putting pressure on the ruble exchange rate.
Meanwhile, Russian industrial and consumer demand for imported machinery, technology, and other goods has jumped, spurring demand for dollars and euros that are harder to come by.
The ruble’s weakness is putting President Vladimir Putin in a tight spot, economists say. He needs to rein in spending if he wants to tame inflation and stabilize the ruble.
But Putin has repeatedly signaled that he intends to keep the invasion going indefinitely, and the next presidential election is coming up in March – with Putin sure to win if he runs, as expected, due to the Kremlin’s control over politics and the media. Yet, he needs to shore up his image following the brief but embarrassing mutiny by the Wagner mercenary group in June and continuing setbacks in the war.
As a result, he is unlikely to curtail military or social spending in any meaningful way, thus shifting the burden of protecting the ruble to the central bank.
“There is a tug-of-war taking place in Russia right now between President Putin’s military ambitions on the one hand and the policy objectives of the central bank and finance ministry on the other,” Liam Peach, an economist at London-based research firm Capital Economics, said in an August 15 note.
That struggle was on stark display ahead of the sharp rate hike, adding to signs of tension within the ruling elite over strains on the economy and society as the war persists.
In a column published by the state news agency TASS on August 14, Putin’s economic adviser, Maksim Oreshkin, laid into the central bank without actually naming the bank or its chief, Elvira Nabiullina, writing that “the source of the weakening of the ruble and the acceleration of inflation is soft monetary policy.”
Nabiullina, who is highly respected abroad and is credited with minimizing the damage to Russia’s economy in just over a decade as central bank chief, has pointed to the decline in foreign trade as the main cause of the ruble’s weakness and has indicated that increased state spending and labor shortages resulting from the war have fueled inflation. Experts have sided with her in the debate.
Regardless, Nabiullina’s job won’t be easy. The West has frozen an estimated $300 billion in Russian central bank foreign currency reserves, shunned investment in the country, and put a price cap on its oil exports, limiting policymakers’ ability to support the ruble, Peach said.
During periods of currency weakness prior to the full-scale invasion of Ukraine and the sanctions that followed, the central bank could sell billions of dollars in foreign currency reserves to shore up the ruble -- or Western investors, believing the currency was undervalued, could snap it up.
Peach said the risks to Russia’s economic stability are materializing faster than he anticipated. He now expects the central bank to raise the rate by another 2 percentage points before the end of the year, to 14 percent.
Higher rates crimp corporate and consumer borrowing, leading to slower inflation, and make ruble deposits a more attractive investment.
“The next few months are likely to be characterized by further falls in the ruble, and much higher inflation and interest rates,” he said.
'Normal Rules Do Not Apply'
Chris Weafer, the founder of Macro-Advisory, a consulting firm focusing on the countries of the former Soviet Union, told RFE/RL that the weak ruble is not a foreboding sign of a brewing financial crisis “because it is a managed currency in a managed economy. The normal rules do not apply.”
The ruble had been a free-floating currency prior to the February 2022 invasion. The central bank has been managing it with the help of currency controls since March 2022, when the West imposed sweeping financial sanctions on the country, Weafer said.
He said the central bank and the Finance Ministry wanted to weaken ruble following its sharp rally in 2022 in order to help narrow the budget deficit. However, “they let it slip too far” and were now being instructed “from on high” to reel it back in.
The ruble reached a seven-year high of 53 to the dollar in June 2022 as surging oil and gas prices generated a foreign currency windfall just as imports collapsed due to the Western sanctions.
The Russian budget receives more ruble tax revenue from exporters when the ruble exchange rate is lower, but a sharp drop relative to other currencies also leads to an acceleration of inflation as imports become more expensive in rubles.
The Russian currency has fallen as much as 30 percent this year and by nearly half since the June 2022 peak as oil and gas export revenue plunged and imports surged.
Weafer said the August 15 rate hike was meant to send a message that “the central bank is in control and wants the ruble to recover.”
Tatiana Orlova, an economist at Oxford Economics in Britain, told RFE/RL on August 15 that the central bank may need to resort to capital controls to stabilize the ruble. She said it could force exporters to sell their foreign currency or limit the amount of foreign currency citizens can send overseas.
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https://www.pbs.org/wgbh/commandingheights/lo/countries/ru/ru_money.html
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Commanding Heights : Russia Money
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] |
[] |
[] |
[
""
] | null |
[] | null | null |
Since 1897, the ruble has been on the international gold standard, and stable. Russia's industrialization requires substantial foreign investment. Ruthless tax levies and high tariffs on imports of industrial products aim to protect Russia's infant industries and help balance the budget. Foreign investment soars, and by 1913 an estimated one-third of all capital in Russia is foreign owned.
Russia's state debt has increased so dramatically prior to WWI, the country has become the greatest international debtor in the world. During the war, taxes are hard to collect, and the government is forced to print more paper money and float its loans domestically and abroad. The cornerstone of Russian financial policy, the gold standard, is abandoned, and the ruble is undermined by inflation.
With the October 1917 revolution, the Marxist concept of the moneyless economy becomes a desired goal, but not yet a practical one. The Bolsheviks nationalize the banks, but make no attempt to restrict inflation. With the destruction of the market economy, inflation soars, and money becomes virtually valueless. A black market based on barter develops to fill the vacuum.
In order to make the market elements of the New Economic Policy (NEP) work, a stable currency is needed. The State Bank reopens and is empowered to issue a new ruble, the chervonets, backed by gold reserves and a balanced state budget. A money market and stock exchange revive alongside the new money.
The banking system is owned and managed by the government. Gosbank is the USSR's Central Bank and its only commercial bank. The ruble is an almost entirely internal currency unit, with the government fixing its rate of exchange with foreign currencies somewhat arbitrarily. Without a market economy, prices are set by the State Committee on Prices, and the real value of the ruble is difficult to determine.
A currency reform that makes 10 old rubles equivalent to one new ruble in 1947 attempts to replace the inflated money of the war years with a firmer currency. As was its intention, it deals a severe blow to the flourishing black market, but also sharply reduces the value of people's savings not kept in a bank.
Following the oil crisis, from 1973 to 1985 energy exports account for 80 percent of the USSR's expanding hard-currency earnings. By the late '70s up to 40 percent of hard currency in foreign trade is being spent on increasing agricultural imports to maintain the informal social contract with the people: low pay in return for cheap food.
World oil prices plummet by 69 percent, and the dollar, the currency of the oil trade, drops like a stone. Almost overnight, the windfall oil and dollar profits the USSR has enjoyed for more than a decade are wiped out.
Gorbachev's reforms force state enterprises to rely to a greater extent on their own financial resources rather than on the central budget. Several new banks are set up to finance industrial undertakings, ending the monopoly of Gosbank. By 1989 inflation begins to make a major impact as goods grow ever more scarce. In 1987 checking accounts begin for personal savings accounts.
The budget deficit exceeds 20 percent of estimated GDP. Soviet foreign debt balloons to $56.5bn at a time when the ruble is undergoing steep devaluation. Capital continues to flee the USSR, and Soviet gold reserves and foreign currency accounts disappear never to be found.
The Soviet state bank is replaced by 15 republic central banks. The ruble is retained in the belief that a single-ruble zone will promote economic reintegration. By 1993 many CIS states create their own currencies. Russia ends Soviet price controls, but monetary stabilization proves elusive. To prevent enterprises going bankrupt, the state prints money. In 1992 inflation reaches 2,323 percent.
Despite having sold off much of its industry, the Russian government finds itself virtually bankrupt. High rates of taxation serve only to drive businesses into systematic tax evasion. To cover its persistent deficits, the Treasury issues bonds (GKOs) at very high rates of interest. They help keep the government temporarily afloat and allow it to persuade the IMF it is solvent and deserves loans.
The aftershock of the Asian economic crisis hits Russia. With commodity prices tumbling, Russia, a major commodity export earner, sees its revenues plummet. Unable to fund its soaring GKO obligations despite a large IMF loan, the government defaults on its debts. Overnight most of Moscow's large banks go bust. The ruble declines to less than a third of its previous exchange rate.
Helped by rising commodity prices and the 1998 ruble devaluation, Russia's foreign exchange reserves rise, and the ruble strengthens. A major reform that cuts tax from a progressive rate up to 30 percent to a flat rate of 13 percent aims to simplify and boost tax collection and stimulate consumer spending. Russians begin to buy and use euros alongside dollars as a safe foreign currency.
|
||||||||
9245
|
dbpedia
|
3
| 12
|
https://www.themoscowtimes.com/2014/12/10/russian-rubles-800-year-history-haunts-current-plunge-a42175
|
en
|
Russian Ruble's 800-Year History Haunts Current Plunge
|
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[
"Howard Amos"
] |
2014-12-10T00:00:00
|
Sergei Sorokoumov has devoted the last quarter of a century to an attempt to raise Russian's pride in the ruble, the country's national currency since the 13th century.
|
en
|
https://static.themoscowtimes.com/img/icons/favicon.ico
|
The Moscow Times
|
https://www.themoscowtimes.com/2014/12/10/russian-rubles-800-year-history-haunts-current-plunge-a42175
|
Sergei Sorokoumov has devoted the last quarter of a century to an attempt to raise Russian's pride in the ruble, the country's national currency since the 13th century.
Recently Sorokoumov's efforts seem to have become a thankless task. The Russian currency has lost over 40 percent against the U.S. dollar this year despite the Central Bank spending over $70 billion of Russia's currency reserves in a bid to slow the plunge.
Dimitrovgrad, a southern Russia town near the Volga River, erected a statue to the ruble in 2004 on Sorokoumov's suggestion and aided by his links to the local mayor. Ten years later and Sorokoumov is campaigning for a similar monument to be put up in nearby Samara.
An official laying ceremony for the foundation stone was even planned for July, but the project has run into local opposition and is no longer likely to be realized.
As the ruble's devaluation becomes a priority for the Kremlin and begins to hit Russian consumers in the form of price rises, any chance of the project's revival appears slim.
"The ruble today is not properly valued and is not managed by those who have the interests of the people at heart," Sorokoumov, a retired Samara university professor and accountant by profession, told The Moscow Times in a telephone interview on Wednesday.
His work on the ruble, and the monuments in Dimitrovgrad and Samara, are all directed toward
boosting the ruble as a symbol and building popular belief in the currency, he said.
"When belief is lost, even the Central Bank cannot do anything," Sorokoumov said.
Long History
With its origins in the 13th century, the ruble is one of the oldest currencies in Europe.
The word itself is said to come from the Russian word юубить/rubit, meaning "to cut or chop," as rubles were originally bits of coins snipped off from the hryvna, the currency used by the medieval Kievan Rus.
Rubles were first minted as a currency in their own right in the 14th century — albeit by several small states in competition. In 1654, the first copper kopeks appeared. Following the sweeping monetary reforms of Peter the Great at the beginning of the 18th century, all rubles were minted with the figure of the reigning emperor or empress. In 1769, the first paper rubles were printed.
In the late 19th century, the reforming tsarist minister Sergei Witte brought Russia onto the gold standard, but the ruble came crashing down with the Russian Empire in 1917 and subsequent civil war. In 1917, a U.S. dollar was worth 11 rubles — by 1923 a dollar was worth more than 2 million rubles.
The Soviet authorities eventually regained their grip over the ruble, though the currency was only used internally. A special currency was used for foreign transactions, and the government
maintained close control over the exchange rate.
Re-Denomination?
Russia has undergone at least four re-denominations in the last century, and recent ruble falls have sparked some tentative talk about another such move.
State Duma Deputy Roman Khudyakov suggested earlier this month that the currency could be re-denominated with little harm to ordinary Russians.
The call, however, elicited scorn from economists. Re-denomination in the current situation would be "pointless" and "totally stupid," said Konstantin Sonin, vice rector at the Higher School of Economics.
"If we had inflation of 1,000 percent a year then it would make sense to remove a few zeroes," he added. While inflation has ticked upward this year, the rate is still under 10 percent.
In 1998, three zeroes were lopped off the currency after rapid inflation.
Similar changes were made under the Soviet regime in 1947 and 1961 as well as in the so-called Pavlov reform of 1991 when Mikhail Gorbachev made higher-value ruble notes almost worthless overnight.
Defending the Ruble
The approach of Russia's financial authorities to the ruble since the fall of the Soviet Union has been marked by attempts to control the currency's value — sometimes successful, sometimes not.
In 1998, Russia simply ran out of foreign currency reserves with which to defend the ruble — leading to a default and runaway inflation. The authorities took a similar approach, albeit more successful, during the global financial meltdown in 2008 when the Central Bank's committed about $200 billion to slow the currency's decline.
But last month, on Nov. 10, the Central Bank announced that the ruble would become a free-floating currency for the first time in modern Russian history.
As long as the Central Bank does not slide back into regular market interventions, a floating exchange rate means Russia's budget can more easily cope with a volatile oil price.
Quintessentially Russian
"The ruble is the most ancient symbol of Russian statehood," according to ruble historian Sorokoumov, adding that it is as important for Russia's identity as the Russian language.
Over recent years, Russian officials have sought to boost the ruble's profile on the world stage.
In 2009, then-President Dmitry Medvedev pushed for the ruble to become an international reserve currency, criticizing the world's dependence on the dollar.
The Kremlin has also pushed ahead with plans to forge a global financial center in Moscow, and last year the Central Bank launched an official symbol for the ruble.
But Sorokoumov lamented that more had not been done and warned that the current situation was very serious — similar to that experienced under the struggling Soviet Union in 1991 and tsarism in 1913 before the maelstrom of the First World War.
"If you want to kill a country, kill its currency," he said.
|
||||
9245
|
dbpedia
|
0
| 10
|
https://www.pbs.org/wgbh/commandingheights/lo/countries/ru/ru_money.html
|
en
|
Commanding Heights : Russia Money
|
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[] |
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[
""
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[] | null | null |
Since 1897, the ruble has been on the international gold standard, and stable. Russia's industrialization requires substantial foreign investment. Ruthless tax levies and high tariffs on imports of industrial products aim to protect Russia's infant industries and help balance the budget. Foreign investment soars, and by 1913 an estimated one-third of all capital in Russia is foreign owned.
Russia's state debt has increased so dramatically prior to WWI, the country has become the greatest international debtor in the world. During the war, taxes are hard to collect, and the government is forced to print more paper money and float its loans domestically and abroad. The cornerstone of Russian financial policy, the gold standard, is abandoned, and the ruble is undermined by inflation.
With the October 1917 revolution, the Marxist concept of the moneyless economy becomes a desired goal, but not yet a practical one. The Bolsheviks nationalize the banks, but make no attempt to restrict inflation. With the destruction of the market economy, inflation soars, and money becomes virtually valueless. A black market based on barter develops to fill the vacuum.
In order to make the market elements of the New Economic Policy (NEP) work, a stable currency is needed. The State Bank reopens and is empowered to issue a new ruble, the chervonets, backed by gold reserves and a balanced state budget. A money market and stock exchange revive alongside the new money.
The banking system is owned and managed by the government. Gosbank is the USSR's Central Bank and its only commercial bank. The ruble is an almost entirely internal currency unit, with the government fixing its rate of exchange with foreign currencies somewhat arbitrarily. Without a market economy, prices are set by the State Committee on Prices, and the real value of the ruble is difficult to determine.
A currency reform that makes 10 old rubles equivalent to one new ruble in 1947 attempts to replace the inflated money of the war years with a firmer currency. As was its intention, it deals a severe blow to the flourishing black market, but also sharply reduces the value of people's savings not kept in a bank.
Following the oil crisis, from 1973 to 1985 energy exports account for 80 percent of the USSR's expanding hard-currency earnings. By the late '70s up to 40 percent of hard currency in foreign trade is being spent on increasing agricultural imports to maintain the informal social contract with the people: low pay in return for cheap food.
World oil prices plummet by 69 percent, and the dollar, the currency of the oil trade, drops like a stone. Almost overnight, the windfall oil and dollar profits the USSR has enjoyed for more than a decade are wiped out.
Gorbachev's reforms force state enterprises to rely to a greater extent on their own financial resources rather than on the central budget. Several new banks are set up to finance industrial undertakings, ending the monopoly of Gosbank. By 1989 inflation begins to make a major impact as goods grow ever more scarce. In 1987 checking accounts begin for personal savings accounts.
The budget deficit exceeds 20 percent of estimated GDP. Soviet foreign debt balloons to $56.5bn at a time when the ruble is undergoing steep devaluation. Capital continues to flee the USSR, and Soviet gold reserves and foreign currency accounts disappear never to be found.
The Soviet state bank is replaced by 15 republic central banks. The ruble is retained in the belief that a single-ruble zone will promote economic reintegration. By 1993 many CIS states create their own currencies. Russia ends Soviet price controls, but monetary stabilization proves elusive. To prevent enterprises going bankrupt, the state prints money. In 1992 inflation reaches 2,323 percent.
Despite having sold off much of its industry, the Russian government finds itself virtually bankrupt. High rates of taxation serve only to drive businesses into systematic tax evasion. To cover its persistent deficits, the Treasury issues bonds (GKOs) at very high rates of interest. They help keep the government temporarily afloat and allow it to persuade the IMF it is solvent and deserves loans.
The aftershock of the Asian economic crisis hits Russia. With commodity prices tumbling, Russia, a major commodity export earner, sees its revenues plummet. Unable to fund its soaring GKO obligations despite a large IMF loan, the government defaults on its debts. Overnight most of Moscow's large banks go bust. The ruble declines to less than a third of its previous exchange rate.
Helped by rising commodity prices and the 1998 ruble devaluation, Russia's foreign exchange reserves rise, and the ruble strengthens. A major reform that cuts tax from a progressive rate up to 30 percent to a flat rate of 13 percent aims to simplify and boost tax collection and stimulate consumer spending. Russians begin to buy and use euros alongside dollars as a safe foreign currency.
|
||||||||
9245
|
dbpedia
|
3
| 45
|
https://foreignpolicy.com/2023/07/23/russia-ruble-money-putin-dictatorship-soviet-union-tsars-history/
|
en
|
How Dictators Make Money—and Money Makes Dictators
|
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[] |
[] |
[
""
] | null |
[
"Carey K. Mott",
"Adam Tooze",
"Alexey Kovalev",
"Steven A. Cook",
"Christina Bouri",
"Christina Lu",
"Robert E. Kelly",
"Paul Musgrave",
"Julian E. Zelizer"
] |
2023-07-23T00:00:00
|
A new history of Russia’s ruble highlights the reciprocal relationship between autocracy and monetary policy.
|
en
|
Foreign Policy
|
https://foreignpolicy.com/2023/07/23/russia-ruble-money-putin-dictatorship-soviet-union-tsars-history/
|
In a financialized world, can currencies shape geopolitics? Hardly a week passes without a pundit forecasting the future of the global order on the basis of subtle changes in the stock of currencies and gold stashed in central banks—as if a few more Chinese renminbi in South America, a little more gold in Asia, or the price of a virtual currency anticipates a world that is more democratic, autocratic, or libertarian. The same goes for broader trends, such as the growing share of Chinese renminbi and other forms of “autocratic money” in commodities trade, sovereign lending, and other global markets historically dominated by the West.
This punditry is not unwarranted. And yet punditry inevitably misses some crucial context—context that only fine-grained case studies can provide. Societies have always created currencies with a political function in mind—but the qualities of a currency, in turn, can also shape politics, both domestic and global. Ekaterina Pravilova’s The Ruble: A Political History persuasively offers Russia’s currency as a case study in the entanglement of money and power, and in so doing, encourages us to understand what catalyzes these global trends. A 200-year “biography of a currency,” the book positions the ruble as both an important part of imperial organization and an unexpected anchor of Soviet influence. The ruble also emerges, amid political and financial crisis, as a potential instrument of Russian democracy—yet its history ultimately demonstrates how a currency can become a primary tool for creating and maintaining an autocracy.
And while Russia’s singular monetary history has earned its economy a “backward” reputation, better known for profiting from geopolitical chaos than sound policy, it has also made the country a pioneer, leading it in a direction that many autocracies are headed today—namely, toward greater isolation from the West’s financial ecosystem. Whether that will also involve greater financial cooperation with other autocratic powers, including, as many anticipate, increased denomination of its trade and investment in China’s renminbi, depends on the Russian government’s conception of its own currency—and the related strength of its own autocracy.
When Russia first issued paper rubles in 1769, nobody considered these assignats to be real money. Catherine the Great implored Russians to trust the state, and so made these bills exchangeable for copper and silver coins stored in Assignat Banks. Before long, the expanding Russian empire demanded more paper, and Catherine supplied it in excess of the state’s stock of metal—that is to say, on credit. She vouched for assignats even amid inflation, and with no independent central bank to hold her accountable, their value depended on the sanctity of the sovereign’s word.
Assignats thus became Russia’s initial form of autocratic money, projecting Catherine’s absolute authority. At a time when the rest of Europe was demanding monetary accountability, Russia backed its currency’s value with its monarch’s “sublime power” rather than any material collateral. When Nicholas I reformed the system in 1839, replacing assignats with silver-based bills backed by the “entire patrimony of the state” rather than a mere personal promise, he intended to maintain this autocracy; indeed, the state’s wealth was not nearly sufficient to provide this support, given that it only had sufficient silver to back up one-sixth of the rubles in circulation. There was no way to actually redeem the entire nation’s wealth under these conditions: Unlike the gold reserves in Europe’s central banks, which were independent from their state’s treasury, Russia’s bullion reserve—representing the bulk of its tangible wealth—was the only one in Europe directly controlled by the state.
Liberal economists and intellectuals in Russia took issue with this lack of monetary independence. Inevitably, a monarch succumbs to the temptation to generate revenue by printing more money, leading to inflation. If money truly represented the nation’s wealth, as Nicholas I claimed, then the tsar should be prevented from destroying that wealth. Since the people bore the cost of the tsar’s excessive money printing, and they lacked political representation, the “people’s ruble” should be convertible—to gold, silver, or something else—and the state should not issue money beyond this wealth.
Where else would Russia get money? If the tsar couldn’t print it as needed, he’d have to take it from foreigners in exchange for Russia’s sovereignty.
Russian nationalists countered that convertibility impeded the tsar’s ability to finance wars that would expand the empire and defend Christian Orthodoxy. Where else would Russia get money? If the tsar couldn’t print it as needed, he’d have to take it from foreigners in exchange for Russia’s sovereignty. Having observed that the French monarchy’s large borrowing required it to cede power to its creditors, Russia avoided borrowing in any significant way until its 1877 war with Turkey. To some, its fiscal prudence had been a virtue—even leading U.S. diplomat Alexander Hill Everett to imagine a world in which Europe was united under Russia’s military, the only one not funded by public debt.
But Sergei Witte, a savvy bureaucrat who defined Russia’s monetary thinking in the 1890s, and the central figure in Pravilova’s history, agreed that backing the currency with gold was a good idea—but not because a gold standard forced the state to commit to rational monetary policy and limited its demands for cash, as liberals hoped. Rather, Witte believed that adopting gold would become a source of stability for the ruble and national pride for Russia; a necessary reassurance to foreign creditors; and, finally, admission to the club of economically civilized nations. Russia’s conservative faction thus spun the liberal idea of convertibility into the rhetoric of the monarchy.
In 1897, Russia, Europe’s only gold-producing country and claiming its largest bullion reserve, became the last major economy to join the gold standard. Witte’s gold-backed paper and small silver change was immediately unpopular among peasants, urbanites, and indigenous Russians alike. Billed as a necessary step toward modernity, Witte’s reform struck many as a return to a medieval economy. Some asked why a relatively poor European country was stockpiling gold, rather than spending it on, say, public education. “All of thinking Russia was against” it, Witte admitted, to the point that journalists in France, the country whose monetary thinking so influenced his plan, called it a “monetary coup d’état.”
Though a coup captures the reform’s dubious origins—Witte’s backroom dealings, a secret decree, and few administrative controls—this isn’t totally accurate. Russia managed to avoid the political revolutions that had forced many of Europe’s other gold standards. And as unpopular as the reform was with Russian citizens, it did please one important faction. According to one source, foreigners invested more capital in Russia in the year after Witte’s reform than the prior 40 years combined.
As its empire expanded, Russia became one of the most aggressive participants in capital markets, and Witte’s gold standard locked it in a vicious cycle: The bigger it became, the more money it needed to print or borrow, and the more gold it needed to hold in reserve. But the more it held in reserve, the less it had to spend, so the more it needed to print or borrow. Soon, Russia was borrowing gold abroad in order to sustain the rate at which it was printing gold-backed rubles, overlooking the fact that this cross-collateralized its bullion reserve, exposing it to both foreign and domestic creditors.
Most countries would simply suspend gold convertibility during war and issue fiat currency instead, but the size of Russia’s foreign debts prevented this. Revolutionaries, fed up with the state’s unaccountable, debt-funded budgets, called for an end to foreign borrowing at the expense of the Russian people. Hoping to expose the state’s insolvency, they circulated a manifesto, partly drafted by Leon Trotsky, that started a run on the regime. Depositors emptied their savings accounts, refusing to pay taxes or accept rubles for payment, while panicked creditors tried to offload Russian bonds.
The regime survived this financial crisis, but the revolution’s calls for political reform had some success: In 1905, Russia transitioned to a constitutional monarchy, and a year later elected its first legislature. However, the State Duma was given little power to separate the State Bank from the treasury, and the state maintained total monetary control.
Whereas, in the eyes of liberals and revolutionaries, the gold standard in other European countries signified true constitutionalism—political representation that demanded transparent financial policy—Russia’s gold policy was supposed to compensate for its lack of such assurances. But for Russians, the government’s rationale was a joke that, according to Vladimir Lenin, then an exiled Bolshevik leader, “made the entire world laugh.”
The viability of this unusual system was tested yet again during the First World War, which caused a race for gold that saw Russia pay unprecedented prices for it on foreign markets and led the state to call in all the country’s gold except the holiest Orthodox relics. “You’ve got a lot of gold trinkets,” read one official’s announcement, and “it is your patriotic duty to deliver all this useless luxury to the state.” Many of these trinkets were worth more in their original form than melted into gold bars. Some Russians, fearing seizure, melted their stashes of gold coins, the easier to carry them out of the country as newly crafted necklaces. The scheme netted only 655,000 rubles—enough for 13 days of wartime expenses.
World War I proved too much for Russia’s financial policy, and in 1914 it abandoned the gold standard. An income tax (which was transparent) and government bonds (which were voluntary) had replaced convertibility as the democratic mechanisms akin to a stake in Russia’s government, but they provided neither sufficient revenue to the state, nor adequate representation to the people.
Thus, even the Bolsheviks, so eager to eliminate money on the way to socialism, found that they still needed it, and generated revenue by printing rubles beyond anything seen by their imperial predecessors.
Thus, even the Bolsheviks, so eager to eliminate money on the way to socialism, found that they still needed it, and generated revenue by printing rubles beyond anything seen by their imperial predecessors. (The Bolshevik-created bureaucracy would soon employ three times as many officials as the imperial government.) Financing the government through monetary emission was not the Bolsheviks’ original plan, but central planning required coordination, and money helped organize resources. Soon, revolutionaries were simply trying to manage the ruble’s depreciation and maintain the state’s monopoly on money-printing.
Reflecting on these mishaps, the early Soviet state consulted a group of experts in 1920 to consider whether money should, in fact, exist under socialism. One participant, Vladimir Zheleznov, argued that money was the only language expressing social needs. To be sure, it represents a “compromise between personal freedom and social organization,” but Zheleznov suggested that each person has an economic interest—even under socialism—and this interest is expressed in money.
Zheleznov’s view, which drew on the Aristotelian concept of money (nomisma) as a tool of reciprocity among citizens, informed the Soviet Union’s New Economic Policy (NEP) in 1921. The NEP allowed citizens to keep money in any amount, replaced Soviet food requisitions with proper transparent taxes, and replaced the imperial ruble with a Soviet one. But just as ancient Greek currency became, over time, a tool for imperialism, the Soviet reform returned Russia to Witte’s imperial standard.
Lenin, like Witte, thought gold might attract foreign investors the way it had after 1897. And so the new treasury notes, which were backed by the state’s credit just like Nicholas I’s bills, circulated alongside bank notes ostensibly backed 25 percent by gold. But with its gold reserves impaired by the war effort (and its Gulag camps yet to properly restart gold mining in Siberia), Lenin’s forces had to raid the last stash of gold in the country, the coffers of the Orthodox church.
But even as it stockpiled gold, the state never actually sanctioned the ruble’s convertibility as promised. “If a certain Ivanov comes to [the] State Bank” demanding gold, said the people’s commissar of finance, then they would assume Ivanov is a counterrevolutionary hoping to buy “a little gold mug with the tsar’s portrait.” With so many unexchangeable rubles circulating, Russians once again saw convertibility as “a panacea for our economy,” but subsequent reforms in 1947 and 1961 did not grant monetary independence—according to Pravilova, they merely reaffirmed the political role of Soviet money as “an instrument of governance, propaganda, and Cold War diplomacy.”
Both imperial and Soviet governments meddled with the monetary system without changing the institutional and political foundations of Russia’s economy, nor fixing its fundamental problem: a lack of productivity. It is no wonder, then, that former Soviet states celebrated their independence by issuing their own national currencies.
Reflecting on Putin’s reign, Pravilova writes that the ruble has absorbed the cost of attacks on Chechnya, Georgia, Crimea, and Ukraine. Putin’s second invasion of Ukraine in 2022 rendered the ruble mostly inconvertible to Western currencies and limited Russia’s access to global finance. Once more, the ruble became a symbol of autocracy and autarky to the West, while its exchange rate prophesied Russia’s fate in its latest war. It is why Putin rushed to stabilize the ruble after the invasion, and why the Biden administration hastened to declare its sanctions on Russia had reduced the currency to “rubble.”
Several scholars have argued that money can play a role in creating and shaping democracy, and Pravilova demonstrates that powerful rulers can use the very same instruments to control the public and consolidate their autocracy. While most of Europe was democratizing and developing the modern toolkit of central banking, Russia managed domestic crisis by changing the ruble’s form, value, or metallic backing, often in lieu of political reform. By designing a currency that maintains autocracy, true monetary accountability will remain beyond the public’s reach.
Once more, the ruble became a symbol of autocracy and autarky to the West, while its exchange rate prophesied Russia’s fate in its latest war.
Before Russia’s gold standard was co-opted by monarchists for the sake of securing foreign credit, it was a way for liberals to demand government accountability under a regime that did not offer true political representation for its people. This concept was always undermined by a lack of monetary independence in Russia, which became liberals’ second major demand for accountability. The ruble remains one of many marginal currencies—occasionally sanctioned, constantly fluctuating, and rarely circulating outside trade alliances—issued by autocrats hoping to retain the centrality of the state over the monetary system.
From Turkish President Recep Tayyip Erdogan’s historically inflationary policies to Indian Prime Minister Narendra Modi’s unilateral seizure of rupees, Putin is far from the only ruler forcing the costs of his regime on citizens who lack proper representation. Some of these rulers have sought new means to defend their autocratic model and challenge the U.S. dollar network with monetary symbols of their authority.
Today, autocratic countries make more than half of the world’s gold purchases, some of which insulate their economies from Western meddling or back trade-oriented cryptocurrencies. Broader currency alliances aim to directly challenge the dollar standard, but attempts in Latin America and other emerging markets have crumbled for lack of a stable keystone currency.
China’s renminbi may be the politically aligned alternative they seek. About 2.5 percent of foreign official currency reserves are held in renminbi, with almost one-third of that amount owned by Russia alone. Chinese President Xi Jinping’s capital controls make the renminbi’s convertibility into Western currencies doubtful, limiting its utility for now. A larger alliance of smaller currencies allays some of that concern, but it also means that, as in imperial Russia, it is the autocrat’s promise that backs up the renminbi, and financial stability depends on his goodwill.
Faced with this prospect, The Ruble contributes to a recently reinvigorated debate: What is money? Is it a mechanism of exchange and credit, or a tool of governance and coercion? A check on autocratic power or a symbol of that power? The ruble’s role at the center of crisis and reform shows that it could be all these things, or none of them. After all, currency not only reflects the political order—it actively shapes it.
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https://www.elibrary.imf.org/view/journals/024/1950/002/article-A002-en.xml
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en
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The Soviet Price System and the Ruble Exchange Rate
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1950-01-01T00:00:00
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SINCE MARCH 1, 1950, there has been much discussion of the significance of the revaluation of the ruble exchange rate and the simultaneous adjustment of retail prices in the U.S.S.R. which occurred on that date. An answer to the questions which have arisen requires an analysis of the price system in the U.S.S.R. and of the meaning of the ruble exchange rate in U.S.S.R. international economic relations. This study attempts to analyze these issues and, in particular, their relation to the question of the assumption of international functions by the ruble.
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IMF eLibrary
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https://www.elibrary.imf.org/view/journals/024/1950/002/article-A002-en.xml
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Price System in the U.S.S.R.
Price formation
The economy of the U.S.S.R is a money economy. Prices are expressed in rubles, and payments by producers and consumers are made in money, although there are exceptions to this rule. As in capitalist countries, some services are provided free of charge; in the U.S.S.R., however, these services represent a larger share of consumers’ real income than in any capitalist country.
Except on “kolkhoz markets,”1 price formation is not automatic. There are price lists for all goods and for services which are not given free of charge, and transactions concluded at other than the fixed official prices are illegal.
The technique of cost calculation in individual enterprises may be similar in the U.S.S.R. to that used in capitalist countries, but the economic mechanism behind the calculation is different. There are no prices for the factors of production which may be summarized under the general term “nature,” and prices for capital are largely absent. Inequalities in average costs of production caused by differences in natural conditions, or in the skill of management, are not allowed to become a source of quasi-rent. An industrial enterprise in the U.S.S.R. consists generally of several plants, whose managers perform only technological functions. The management of the enterprise credits each plant for its output at its planned average costs (based mostly on actual past performance) plus a certain mark-up for profits, which at the most amounts to 10 per cent. The enterprise delivers the output of its plants to a central selling organization for the region at prices which result from averaging the costs and profits of the individual plants. The central selling organization, in turn, sells at prices equal to the average of costs plus profit mark-up for all enterprises in the region. Variations in these quasi-arbitrary uniform selling prices, which may be described as “delivery prices,” are usually allowed only between regions.
Demand and supply of any producers’ good in short supply are not adjusted by increasing its price above average production costs plus a mark-up for profits, but through an arbitrary reduction by the planning authorities of the quantities requested by individual enterprises (in their original “microscopic” plans). Occasionally, the central economic authorities increase the profit mark-up for individual enterprises or groups of enterprises to enable them to undertake rationalizing investments or to extend their productive capacity if they are considered to be working under specially favorable conditions and to have a skilled management. However, this is not done with the aim of adjusting effective demand to existing supply conditions.
This method of pricing is similar to that used by capitalist countries in wartime.2 It carefully avoids the marginal approach; indeed, the marginal principle is regarded in the U.S.S.R. as heretical, and Soviet economists are careful not to propose anything which appears to be influenced by it. Nevertheless, even in the Soviet economy there is some evidence of the application of the marginal principle. Each manager of a Soviet enterprise in making technological decisions is likely to act in a way that implies adherence to the marginal principle, just like an entrepreneur in a capitalist country. The factors of production of which the supply is determined for the Soviet “entrepreneur” are, however, much more numerous than for his counterpart in a capitalist country. Nor can he regulate the output of his plant in the same way as a capitalist entrepreneur. As a result of the generally narrower scope for the application of the marginal principle than in developed capitalist countries, the allocation of productive resources may be presumed to be objectively less economic in the U.S.S.R. than in such capitalist countries.
The prices of producers’ goods also include turnover taxes. But the tax rates for producers’ goods are very low, and the rates on producers’ goods which are used in the production of other producers’ goods are lower than on those which are next to the stage of consumers’ goods. The rates for a single commodity are also believed to be different, according as the commodity is to be used in the production of producers’ or consumers’ goods.
Turnover, or rather sales, tax rates on consumers’ goods, on the other hand, are very high,3 sometimes constituting as much as 90 per cent of the selling price. Even on goods which in British terminology would be called “utility goods,” they are frequently as high as 75 per cent. In 1940, the turnover tax constituted about 61 per cent of the total value of consumers’ goods sold to the public; for 1941, a percentage of 73 was planned.4
Turnover taxes are used to influence consumer demand so that it exerts little influence on the structure of production of producers’ goods. If the scales of preference of those who control economic planning differ from consumers’ preferences, the turnover tax may be used to adjust the demand for any good to an arbitrarily regulated supply. Even for goods in which the planners take no interest, but permit production in proportions regulated by consumers’ choices, producers’ interpretation of consumers’ wishes may be obscured by tax rate manipulations. Since, moreover, consumers are unable by their individual actions to determine either the rate or the volume of savings, “consumers’ sovereignty” is for the most part absent in the Soviet economy.
This method of pricing, largely independent of the marginal principle, gives the Soviet Government power to introduce, almost overnight, changes in the level of prices or in the price structure. Such over-all changes in price lists have occurred several times in Soviet history. In some instances, price adjustments had become necessary as a result of conditions created by inflation or other forms of economic mismanagement; in others, they seem to have been the inevitable outcome of the normal working of the Soviet economic organization.
Prices and economic development
The Soviet economy may be said to be in equilibrium at a given national income level and a given price level of consumers’ goods if the prices of all elements in the cost calculation have been established so as to assure equality between the value of the current production of consumers’ goods and total consumers’ outlays, which in the U.S.S.R. are almost identical with total wage earnings minus loans to the state and insignificant voluntary private savings. If—with given preference scales of consumers and of those who ultimately decide about economic planning,5 given techniques of production, and given conditions of economic and social structure—production and government expenditure expand at the same rate as population, the prices of the elements in the cost calculation and of consumers’ goods may remain unchanged. As soon, however, as either the technique of production, the economic and social structure, preference scales, or per capita production of consumers’ goods changes, cost elements and/or prices of consumers’ goods must also change.
In fact, in the U.S.S.R. national income, techniques of production, and economic structure change rather rapidly. Since the Soviet Government also aims at distributing increments in the national income so that per capita production of consumers’ goods may increase, frequent adjustments in wage earnings and other cost elements and/or in prices of consumers’ goods are therefore to be expected.
If the supply of consumers’ goods increases, equality between supply of and demand for these goods—one of the conditions of general equilibrium—may be maintained by means of a piece-work system of pay, efficiency premiums, and increases in basic wage rates. If total earnings increase in a certain period more or less than the supply of consumers’ goods, the prices of these goods should be changed. Before the war, the Soviet economy was subjected to continuous (although receding) inflationary pressures caused by imperfections in economic management, and there were frequent upward adjustments in the prices of consumers’ goods. Since the war, however, as a result of reconstruction, large imports of machinery, increasing supplies of raw materials, and improvements in the skill and organization of labor, the per capita supply of consumers’ goods has increased rapidly. At the same time, actual average costs of production have been continuously and significantly decreasing, and the cost elements, adapted to the previously existing conditions, have become more and more fictitious. In a highly centralized planning system there is, naturally, strong resistance to frequent changes in the cost elements and in the prices of consumers’ goods. It is a great convenience in planning to operate with stable “values.” In contrast to the actual tempo of economic development, the Soviet system of economic management may therefore in this respect be regarded as rigid.
Under dynamic conditions, planning which operates on values fixed in the past gradually becomes ineffective, and after a certain time, during which only sporadic and uncoordinated adjustments are made beneath the unchanged surface of fixed prices, over-all changes become necessary. Planned costs must be revised so as to reinstate economic incentives in enterprises, and wages and/or prices of consumers’ goods must be changed so as to restore equilibrium between the production of consumers’ goods and the demand for them, in conformity with whatever policy determines the share of consumption in the national income.
Since the monetary and price reform of December 1947, there have been three such major adjustments, each involving an over-all reduction in prices. The method of adjustment by increasing wages and salaries has not been used because it seemed less convenient for planning purposes. Changes in wages would seriously distort all the established elements of cost calculation.
Technique of price reduction
A description of the techniques used in the price reduction of March 1950 and of its financial implications cannot be found in the Soviet publications which are available. They may be deduced, however, from the principles of the Soviet price and financial system.
A reduction in the prices of consumers’ goods in the U.S.S.R. can be accomplished either by decreasing production costs, by lowering the turnover tax, or by a combination of the two, and either with or without a reduction in earnings.
Actual costs of production decrease gradually. As long as planned delivery prices remain unchanged, a reduction in costs results only in increased extra profits, i.e., profits above the established mark-up. An adjustment of planned costs to the actual level of costs is permitted only when the planning authorities so decide. Then if turnover taxes remain unchanged, the retail prices of consumers’ goods must be reduced in accordance with the reduction in costs of production.
The reduction of prices in the U.S.S.R. on March 1, 1950 involved an estimated average fall of 15 to 20 per cent. Under the assumption that, on the average, the turnover tax accounts for 60 per cent of retail prices, such a reduction in prices would require a reduction in total costs of production (including a mark-up for profit) by 37.5 to 50 per cent, if the yield of the turnover tax were to remain unchanged. The actual reduction in production costs is unlikely to have been of this magnitude, since there had been a reduction in prices of consumers’ goods and in costs as recently as March 1, 1949. Neither can it be assumed that the price reduction was effected solely by reducing turnover tax rates at unchanged costs of production. With unchanged costs, prices—of which 60 per cent was accounted for by turnover tax—could have been reduced by this means by 15 to 20 per cent only if it were possible to reduce turnover tax rates by 25 to 33 per cent. Such a reduction would have been either too burdensome for the state budget, or would have had to be associated with some new revenue-increasing measures, which would mean a major change in the financial system of the U.S.S.R., about which nothing has been heard. A change of this kind might be deduced if costs of production were to fall while “delivery prices” remain unchanged, the price reductions then being effected by cuts in the turnover tax rates. This would mean the legalization of extra profits in the form of increased profit mark-ups. The Soviet economic authorities, however, aim at the maintenance of rather low profit margins, to prevent managers of enterprises from relaxing their efforts to economize on expenses. (Actual costs in excess of delivery prices may cause an investigation into the work of the manager, followed by sanctions.) Since part of profits may also be used for investment in the enterprises where the profits originate, increases in profits would mean an expansion of decentralized investments with the eventual possibility of far-reaching changes in the planning system.
Actually, it seems probable that in the changes of March 1950 both techniques for reducing prices were used. Planned delivery prices were reduced and turnover tax rates cut. The application of these techniques means either an actual decrease in government revenue or an increase at a declining rate. According to the Soviet official statement, the recent cut in prices will reduce the 1950 expenditures of the population by 110 billion rubles; 80 billion will be saved through lower prices in state stores and 30 billion through price reductions on kolkhoz markets6 and in cooperative stores. This statement probably means that, if prices had remained unchanged (i.e., equal to those of 1949), the population of the U.S.S.R. would have spent in 1950 from their money incomes, increased according to plan, 110 billion rubles more than at the reduced price level. The 80 billion rubles “lost” by state stores would represent 18 per cent of the total revenue planned in the 1949 budget. Even on the assumption that the increase in the national income (at 1949 prices) for 1950 were 20 per cent, and that—if prices had remained at the 1949 level—the percentage increase for state revenue were the same as for the national income, the reduction in anticipated revenue that would be necessary if the price reduction had been only at the expense of current government proceeds would be so large as to be very unlikely. Any increase in the national income is usually divided between consumption and investment (the latter is financed mostly by the state budget) in such a way as to ensure a significant increase in investment, greater than the increase in consumption. The increase in the national income of 1950 would have to be very large if government revenues and, consequently, also investment were to increase significantly, in spite of a cut in the rate of increase in government revenues so severe that, if it had been applied in 1949, actual revenues would have fallen by almost one fifth.
This seems to suggest that the reduction in prices may have been made possible in part by a revision in workers’ efficiency rates, basic wage rates probably remaining unchanged. Sporadic revisions of this kind are possible in view of changes in methods of production (e.g., increases in capital equipment) which increase the efficiency of labor.
However, insofar as the reduction in retail prices was achieved through a cut in turnover tax, it was probably carried out at the expense not only of current budgetary revenues, but also of the revenues of the previous year (1949). Inventories were probably gradually accumulated before prices were reduced (which implies a relative reduction in government revenues during the period of accumulation and also a volume of production in excess of current sales to the public). The expansion in consumers’ demand in response to reduced prices may be satisfied by a gradual depletion of inventories until current production increases sufficiently. In view of these considerations, it seems possible that the reduction of prices may have been achieved without any significant reduction in the earnings of the population.
The relative importance, in practice, of these techniques for reducing prices cannot be evaluated. However, it may be assumed that the combined effect of increased national income and reduced prices will be an increase both in real per capita consumption (although probably not to the full extent of the price reduction) and in government revenue and investment.
The reduction of prices of consumers’ goods by various percentages (necessarily arbitrarily selected, although an analysis of the market certainly preceded this action) will cause shifts in demand. Further price adjustments, covering a wide range of goods, are therefore to be expected. The reduced prices, however, may have been set at such a level that the aggregate value of consumers’ goods available (after previously accumulated extra inventories have been sold) will for some time be smaller than the amount of money which consumers would be willing to spend on consumption goods during the same period. This would have effects similar to those of an inflation. In such a case, the necessity of adjusting prices to consumers’ preference scales (while the general price level remained unchanged) would be less strongly felt, since under inflationary conditions almost any combination of goods can be sold easily, even though relative prices are not correctly fixed.7
Price spread
As pointed out above, costs of production under the Soviet pricing system do not include rent or interest, and in industries producing capital goods they include only small profits (compared with those which would be considered as normal in capitalist countries). What is not included by state enterprises in the costs of production is collected by the state in the form of high turnover taxes on consumers’ goods. Turnover taxes are also a means by which the quantity of consumers’ goods which is demanded is made equal to the quantity supplied. The volume of output of consumers’ goods is set by the central planning authorities, and may be safely assumed to be smaller than would be produced if a fair degree of consumers’ sovereignty existed in the Soviet Union. Turnover taxes are therefore a means of collecting a significant part of state corporate savings, which correspond to investments decided by the planning authorities.
The result of this pricing system is a larger discrepancy than is usual in capitalist countries between the delivery prices of all goods—which roughly correspond to wholesale prices charged by producers in capitalist countries—and the retail prices of consumers’ goods. For example, for bread this discrepancy amounted before the war to about 75 per cent of the retail price, which is probably more than the difference between the producers’ price and the retail price in any capitalist country. In comparison with the situation in capitalist countries, there are, therefore, in the U.S.S.R. one group of goods which are relatively “cheap” and another which are relatively “expensive.” To the relatively “cheap” category belong all producers’ goods and consumers’ goods at delivery prices, while to the relatively “expensive” group belong all consumers’ goods at the retail stage of distribution. The difference between the price levels of these two groups of goods may be called the relative price spread or, more briefly, the price spread.
The relative price spread in the U.S.S.R., in comparison with, say, the United States, indicates the extent to which the difference in the Soviet Union between the wholesale (delivery price in the U.S.S.R. and wholesale factory price in the U. S.) and retail prices of representative baskets of goods and services is greater than in the United States. If prices of baskets of “cheap” goods in the United States and the U.S.S.R. are denominated “Aa” and “Ar,” respectively, and prices of “expensive” goods “Ba” and “Br,” the following formula may be used for measuring the relative price spread in percentage terms:
100 - ( Ar Br : Aa Ba ) 100
It is, however, always possible to assume a hypothetical exchange rate for the Soviet currency which will make Aa equal to Ar. The formula for the relative price spread then becomes
100 ( Br - Ba ) Br
A comparison of the price situations in capitalist countries may also reveal the existence of relative price spreads there. Differences in taxation, in social insurance systems, and in customs duties, may create price spreads for various groups of goods and services, and restrictions on the mobility of factors of production and monopolies help to maintain these spreads.8 These spreads, together with the effects of differences in natural resources, may make one country “cheap” or “expensive,” depending on the groups of goods used for comparison, and thus affect the commodity composition of exports and imports. However, such price spreads as exist between capitalist countries are not nearly so extensive as in the U.S.S.R.
The formula suggested above cannot in practice be used to calculate the actual price spread in the U.S.S.R.—e.g., in comparison with the United States—since information on prices in the U.S.S.R. for the “A” group of goods is lacking, and on prices of the “B” group of goods is very limited. The price spread may, however, be estimated indirectly. The turnover tax content in the retail prices of consumers’ goods is known to have been 61 per cent in 1940 and to have been planned at 63 per cent for 1949. It may be assumed to amount to 60 per cent at present. The remaining 40 per cent represents delivery prices plus costs of distribution. If costs of distribution in the U.S.S.R. represent the same percentage of delivery or wholesale factory prices as in the United States, the price spread in the U.S.S.R. relative to the United States would correspond to the turnover tax content in the aggregate value of consumers’ goods. In fact, although the bureaucratic distribution apparatus of the U.S.S.R. works clumsily, the distribution costs in the Soviet Union may be relatively lower than in the United States, because profits of trading organizations are set very low. There are, moreover, in the United States, some price-increasing taxes which correspond to part of the 60 per cent turnover tax content in the Soviet prices of consumers’ goods. The relative price spread may therefore be assumed to be somewhat less than 60 per cent.
Under the conditions of a market economy, an estimate such as that made above would be fairly representative of the price spread for all goods of category “A.” But in the U.S.S.R. the price mechanism does not fulfill its traditional function; the allocation of factors of production between the industries producing capital goods and those producing consumers’ goods is not motivated by relative profitableness. It is, therefore, possible for the price spread for capital goods to differ significantly from that for consumers’ goods, and there seems to be convincing evidence that this is actually the case. Profits in industries producing capital goods are set at a much lower level than profits in industries producing consumers’ goods, the labor assigned to the former group of industries is generally better trained, and the machinery used there is more extensive and modern. Consequently, the price spread between capital goods and raw materials at the “delivery” stage and consumers’ goods at the retail stage may be larger than that between consumers’ goods at the “delivery” and the retail stages.
Meaning of the Exchange Rate of the Ruble
Exchange rate and the price spread
In order to interpret the real meaning of the ruble exchange rate in its relation to the Soviet price system, let the assumption first be made that the Soviet authorities make decisions concerning international transactions on the basis of existing domestic and foreign prices, as is done in free competitive economies.
In free competitive economies, the difference between wholesale and retail prices does not vary very much from country to country; in other words, any relative price spread that may exist cannot be of great significance. If an exchange rate is allowed to have its full effect upon foreign trade transactions (i.e., without direct or indirect premiums or surcharges), this in itself tends to limit the size of any price spreads. And, in turn, if price spreads are small, this facilitates the use of single exchange rates in economic relations with other countries. The relative price spread for the U.S.S.R., however, is large, and this has a direct bearing on the foreign value of the Soviet currency.
Soviet merchandise exports and imports are composed of goods of “A” price category. Even consumers’ goods are sold to export organizations at delivery prices. Therefore, if prices are to be used as a guide in the decisions of the Soviet foreign trade organizations, the exchange rate used in foreign trade transactions would have to conform to the “A” price level. A similar assumption applied to consumers’ goods and services sold to foreigners inside the U.S.S.R. would mean that the exchange rate applied to foreign travellers, businessmen, and diplomats should conform to the “B” price level. Because of the price spread discussed in the preceding section, these two exchange rates cannot be identical. As long as the present system of pricing is maintained in the U.S.S.R., and on the assumption that exchange rates should conform to domestic and foreign prices, there should therefore be two exchange rates for the ruble.
The realization that no single exchange rate can fully indicate the relationship between the values of the Soviet and other currencies is of great significance for many comparisons between Soviet and capitalist economic magnitudes. Economists sometimes use prices of consumers’ goods for estimating the proper exchange rates of various countries. Because there are no significant relative price spreads among those capitalist countries which do not have extensive economic controls, the exchange rate thus estimated may approximately represent the price relations of all goods in such countries. Such an exchange rate, however, would not be proper for an estimate of, for example, the dollar value of the budgetary investment appropriations in the Soviet Union. Estimates and analyses of the national income of the U.S.S.R. may also lead to erroneous conclusions if the peculiarity of the Soviet economic system discussed above is not taken into account.
On the assumption that the decisions of Soviet authorities concerning international transactions are based on existing domestic and foreign prices, and that there are generally favorable conditions for the development both of exports and of tourism, the existence of a single ruble exchange rate would result in smaller foreign exchange proceeds than if there were two exchange rates (or three, if the relative price spread between prices of capital goods and delivery prices of consumers’ goods is significant).
In fact, after July 1, 1950 there was to be only one exchange rate for the Soviet currency, 4 rubles to 1 U. S. dollar. Until June 30,1950, there were two exchange rates: one official, 4 rubles per U. S. dollar, which followed from a declared gold content of the ruble, and the other preferential, 6 rubles per U. S. dollar, which was called the “diplomatic” exchange rate. The existence of two exchange rates, however, did not necessarily mean that there was conformity between exchange rates and prices in the U.S.S.R. and abroad; nor did it prove that decisions concerning individual international transactions were based on prices in the U.S.S.R. and abroad. Even an approximate conformity between exchange rates and price levels in the U.S.S.R. and abroad could merely suggest, but not prove, that exchange rates were actually applied to Soviet individual international transactions. There was, in fact, no such conformity; and there is no conformity between the present single exchange rate of the ruble and the price levels of either “A” or “B” groups of goods. This will be shown in the last section of this paper. In the present section, only the problem of the conformity between exchange rates and prices in individual transactions will be discussed.
The relevance of the exchange rate
Foreign trade in the U.S.S.R. is a state monopoly. Its purpose, apart from the achievement of the highest possible prices for exports and the lowest possible prices for imports,9 is, as has been explicitly stated by those responsible for Soviet economic policy, to shield the domestic economy from external influences.
Foreign trade organizations buy in the domestic market goods destined (by the economic plan) for export, and sell imported commodities to Soviet enterprises at domestic delivery prices. (The prices of imported goods may be set more arbitrarily by import organizations, since in many cases they are very imperfect substitutes for goods produced domestically.) Export goods are sold and import goods bought by the trade organization at the prices prevailing in foreign markets. Prices in trade with other member countries of the Council of Mutual Economic Assistance10 deviate from world market prices because of adjustments for differences in transportation costs, etc. They are probably also influenced by the comparative bargaining powers of the parties to a trade agreement.
The ruble exchange rate is of no interest to Soviet domestic producers (i.e., those who sell goods destined for export to exporting organizations), to final purchasers of imported goods, or to foreign exporters and importers. Transactions between foreign exporters and importers and Soviet specialized foreign trade organizations are settled in foreign currencies (or in some abstract unit of value), and transactions between Soviet foreign trade organizations and Soviet suppliers or purchasers of exported or imported goods in rubles. No explicit exchange rate is used.
In view of the method of price formation in the U.S.S.R. and of the fact that domestic prices are “shielded” from outside influences, any resemblance between the price patterns in the U.S.S.R. and in other countries could be nothing more than a sheer coincidence. Therefore, if a uniform exchange rate were applied to foreign trade transactions, carried out according to a plan constructed independently of domestic prices, some exporting and importing enterprises would make extra profits while others would suffer losses. The exchange rates actually involved are, therefore, only implicit and necessarily multiple, and, in the management of the Soviet economy, are of no significance. The exchange rate is, in fact, irrelevant in foreign trade transactions. It in no way serves as a guide in making foreign trade decisions. If it were to be used for this purpose, it would have to be a price, which the ruble exchange rate is not.
The only use of the official exchange rate in the U.S.S.R. is to convert foreign exchange reserves into rubles in order to make them an item formally comparable with other items in the balance sheet of the State Bank. But since the official exchange rate does not represent an average value of the ruble (as will be shown in the next section), the ruble values of foreign exchange obtained in this way cannot serve any planning purpose. It is doubtful whether even an exchange rate which conformed to the “A” price level could serve a planning purpose, because the distortion of prices would mean that any shift in the commodity composition of exports or imports would cause changes in the value of the ruble.
A comparison of foreign trade balances expressed in terms of a foreign currency and in rubles may provide a limited substitute for the guidance functions of the exchange rate. U.S.S.R. foreign trade may be balanced in terms of rubles and at the same time unbalanced in terms of foreign exchange, or vice versa. A comparison of these balances might reveal fiscal ruble losses or profits. Where accounts are unbalanced in terms both of foreign exchange and of rubles, a formula may be devised for calculating the fiscal results of foreign trade transactions.
If there are to be neither gains nor losses, the following condition must be fulfilled: IrId=ErEd; where “Ir,” “Er” are the ruble values of imports and exports, and “Id” and “Ed” the dollar values of imports and exports, respectively. This condition means that the average implicit exchange rate for imports is equal to that for exports. If it is not fulfilled, the difference between the actual ruble value of imports and the hypothetical dollar value which would give a zero fiscal profit, Ir-IdErEd, or a similar difference computed for exports, IrEdId-Er, shows the range in terms of rubles of the fiscal profits or losses. If exports and imports in terms of dollars are equal, both formulae reduce to Ir—Er.
Such calculations may be applied for the purpose of choosing the goods to be exported or imported. In order to eliminate or diminish fiscal losses, or to obtain fiscal profits, the commodity composition of exports and imports should be set so as to maximize the implicit exchange rate of the ruble. In fact, however, shifts in the commodity composition of Soviet foreign trade are determined by the requirements of Soviet economic plans for production and consumption, and appear not to be influenced by any consideration of this kind.
While the official exchange rate of the ruble is irrelevant in foreign trade transactions, it is relevant in transactions with foreigners who purchase consumers’ goods and services inside the U.S.S.R. at retail prices and pay in rubles. The scope of transactions in which the exchange rate is relevant might be widened or narrowed. For example, it might be made relevant in payments for transit charges, if these had to be made in rubles according to domestic tariffs, or its relevance might be limited by organizing special stores for diplomats, where payments were required in foreign exchange. It is, however, difficult to imagine any practical policy which would completely eliminate the relevancy of the exchange rate.
Since the official ruble exchange rate is irrelevant for foreign trade purposes, i.e., in transactions in goods of “A” price category, but is relevant in transactions in goods of “B” price category, it should be expected to conform to the “B” price level.
Significance of the Revaluation of the Ruble
Revaluation of the ruble
On February 28, the Council of Ministers of the U.S.S.R. announced the revaluation of the Soviet ruble and, as indicated above, a reduction of retail prices of important consumers’ goods, effective March 1, 1950. The value of the ruble used in accounts for foreign trade transactions was fixed at 0.222168 grams of fine gold, which corresponds to a price for fine gold of 4.5011 rubles per gram. The exchange rate of the ruble was accordingly changed from 5.30 to 4 rubles to the U.S. dollar, a revaluation of 32.5 per cent.11 The preferential diplomatic exchange rate was changed from 8 to 6 rubles to the U.S. dollar, a revaluation of one third. As of July 1, 1950, the preferential diplomatic rate was abolished.
By tying the ruble to gold, the Soviet Government discontinued the practice established in 1937 of calculating exchange rates in terms of other currencies on a dollar basis: “In the event of further changes in the gold content of foreign currencies or in their exchange rates, the State Bank of the U.S.S.R. shall alter the foreign exchange rate of the ruble correspondingly.”12
The revaluation of the ruble was justified, according to the official statement, by three reductions of prices of consumers’ goods in the U.S.S.R. since the monetary reform of 1947, and by the increase of prices in Western countries.13 This “resulted in … strengthening of the ruble, increasing its purchasing power, so that it is now 14 higher than its official exchange rate.”15
“Internationalization” of the ruble
Since under the present price and foreign trade system of the U.S.S.R. the exchange rate of the ruble has been irrelevant for foreign trade transaction purposes, the opinion of the Soviet Government that the rate should conform to relative price levels, and its decision to change the rate, may suggest that the Soviet Government intends to give the ruble some new important functions in its foreign trade.
The Soviet Union has ceased, since 1949, to observe strictly the long-established rule of expressing foreign trade agreements in terms of foreign exchange, mostly in U.S. dollars. The values of goods to be exchanged were expressed in rubles in a few of the agreements concluded in 1949 with Eastern European countries. Also, after the ruble revaluation of February 28, 1950, Poland published her 1949 foreign trade statistics in terms of the new ruble, instead of in U.S. dollars, as had previously been customary. This development may seem to indicate that the U.S.S.R. intends, in its trade transactions, to replace the U.S. dollar with the ruble, and to create a ruble bloc in Eastern Europe, possibly with a multilateral system of settlement.
If the ruble were to replace the U.S. dollar in Eastern European trade, it would have to fulfill the same functions that are now performed by the dollar. (This would be a necessary but not a sufficient condition for the ruble to become an international currency.) At present the U.S. dollar is used by member countries of the Council of Mutual Economic Assistance in quoting prices and values in international trade and for reserve purposes. In fulfilling the first function, however, it expresses approximately world market prices, and not the prices actually prevailing in the U.S.S.R. and in other Eastern European countries. The importance of the dollar as an element in monetary reserves is very limited: trade under bilateral agreements is usually balanced, and temporary export surpluses represent an accumulation of “clearing dollars,” which can be converted into goods only within specified commodity lists at negotiated prices. The dollar performs a reserve function in the full sense only for the final export surpluses which, according to some agreements, must be paid in U.S. dollars. But even in this case, this function is performed only because dollars are convertible into goods in countries outside Eastern Europe and are therefore acceptable by any Eastern European country.
For the ruble to fulfill the functions at present performed by the U.S. dollar, it must be made acceptable in payments for final trade surpluses, and indeed if trade within the Eastern European countries is to be multilateralized, it must be made acceptable for that purpose to a larger extent than is the U.S. dollar at present in that area. This requirement might be satisfied in two ways.
First, the prices used for foreign trade purposes might still be world market prices, while Eastern European countries would be supplied with the amounts of rubles convertible into U.S. dollars (or any other Western currency) needed to cover their import surpluses in trade with the West, which for all practical purposes would be equivalent to the convertibility of rubles into gold. This solution, although it probably would contribute to the multilateralization of trade, would not in fact replace the U.S. dollar with the Soviet currency. The ruble supplied to Eastern European countries by the U.S.S.R. would not be the ruble circulating in the Soviet Union. As long as the valuation of goods exchanged was based on world market prices, it would in fact be only the U.S. dollar or some other currency, to which the name of ruble would be given while it was being used in Eastern Europe. Such a solution may be called a nominal substitution of the ruble for the U.S. dollar.
Alternatively—and this is the only way by which the Soviet currency could actually be made a substitute for the U.S. dollar in its economic functions—the ruble might be made directly convertible (within the conditions of the trade agreements) into goods at the delivery prices prevailing in the U.S.S.R. and in other member countries of the Council of Mutual Economic Assistance. This would mean that the ruble exchange rate would become relevant in foreign trade transactions, and would perform the function of guidance normal to an exchange rate. If this condition were fulfilled, the ruble would cease to be a purely domestic currency and, under favorable technical conditions, might come to be used in international transactions, not only inside the U.S.S.R. but also by other countries.
The new exchange rate and the price level
The March 1950 revaluation of the Soviet currency could be regarded as a preliminary step toward internationalization of the ruble, only if the exchange rate of 4 rubles to the U.S. dollar then established were to correspond approximately to the “A” price level in the U.S.S.R. Such an exchange rate would facilitate the changes in price patterns which are necessary if the exchange rate of the ruble is to perform guidance functions and become a relevant factor in international trade.
The lack of data on wholesale prices in the U.S.S.R. does not permit any precise estimate of the ruble exchange rate which would conform to the “A” price level in the U.S.S.R. and to general price levels in Western countries. On the basis of limited data on the prices of consumers’ goods, the exchange rate which corresponds to the purchasing power of the ruble, measured in terms of prices of “B” goods, may, however, be roughly estimated at about 25 rubles to the U.S. dollar. The value of the ruble measured by reference to the cost of living is greater because of the importance in the U.S.S.R. of relatively inexpensive services, e.g., rents, and may be estimated at about 20 rubles to the U.S. dollar. If the relative price spread in the U.S.S.R. amounts to 60 per cent, the average exchange rate based on “A” prices, calculated on the basis of the simplified formula, would be around 10 rubles to the U.S. dollar, with the rate appropriate for capital goods perhaps somewhat higher. On this hypothesis, the ruble seems, at the present exchange rate of 4 to the dollar, to be overvalued by about 150 per cent. If the price spread in the U.S.S.R. is assumed to have been estimated with sufficient accuracy, the present exchange rate is thus too high to represent even approximately the relation between average domestic Soviet prices of “A” goods and wholesale prices in Western countries.
It might be argued that the present ruble exchange rate has been established because it corresponds to the prices and exchange rates of the members of the Council of Mutual Economic Assistance, which account for about two thirds of the total “commercial” foreign trade16 of the U.S.S.R. If this were so, the currencies of the Eastern European countries, in relation to Western currencies, would also be overvalued by about as much as the ruble.
The exchange rates of at least three countries, Czechoslovakia, Hungary, and Poland, which account for the greater part of Eastern European trade with the U.S.S.R., probably correspond approximately to their “B” price levels, and in any case are not overvalued by 150 per cent. To ascertain how far the present ruble exchange rate corresponds to Eastern European prices and exchange rates, however, rates corresponding to “A” price levels should be compared. Since such exchange rates do not exist in these countries, the Soviet Government cannot have been motivated in its decision to revalue the ruble by a desire to adjust it to Eastern European exchange rates.
It may be concluded that, at the present exchange rate, the ruble is seriously overvalued in comparison with any currency of importance to the U.S.S.R., and that it does not represent even approximately the “A” price level purchasing power parity.
Conditions for relevance of the exchange rate
Even if the present ruble exchange rate corresponded approximately to the relation between “A” price levels in the U.S.S.R. and in Eastern European countries and wholesale price levels in Western countries, this would not be a sufficient condition for the internationalization of the ruble. A further condition would also have to be fulfilled: national exchange rates would have to be made relevant in international trade transactions. Only then, under favorable technical circumstances and arrangements, might the ruble become an international currency. This condition has not so far been fulfilled in the U.S.S.R. or in the Eastern European countries which are members of the Council of Mutual Economic Assistance.
If internationalization of the ruble is to be achieved on a world scale, Soviet domestic prices in foreign trade transactions would have to be adjusted to Western price patterns, in order to make them relevant for foreign trade transactions. Western price patterns could be influenced only insignificantly by the U.S.S.R., through changes in the volume or the commodity composition of its trade. The changes which would be necessary in Soviet domestic price patterns, and possibly also in its taxation system17 would, however, be far-reaching. That this would be the aim of the Soviet Government is improbable. It would involve radical changes in economic planning, and for that matter in the whole economic system of the U.S.S.R., and is in any event impossible on ideological grounds. The Soviet economic system and its technical methods of economic management are considered by the Soviet authorities to be superior to any other, and the conviction that the acceptance of external influences would impair the purity of socialist principles, as interpreted by the Communist Party, is deeply rooted in Soviet minds.
It might be argued, however, that internationalization of the ruble may be feasible if limited to the U.S.S.R. and other members of the Council of Mutual Economic Assistance (possibly including Eastern Germany and China). This, it might be maintained, is possible, since Eastern European prices could be adjusted to Soviet patterns by governmental administrative action. An Eastern European clearing union could then be created and a certain degree of multilateralization achieved.
Such a unification, however, would require the members of the Eastern European Clearing Union to have two different standards of value for foreign trade: one for partners in the Union and the other for the outside world. The first would be based on Union price patterns, the latter on the U.S. dollar and other Western currencies. It is doubtful whether such a system would represent any simplification, compared with the present one.
In any event, such unification would not be consistent with the present economic doctrine and management of the U.S.S.R. The system of pricing (as distinct from the price pattern which results from the pricing system) applied in the U.S.S.R. is regarded there as the ultimate perfection of economic calculus and is gradually being accepted by other Eastern European countries. Because of differences in basic economic facts, the price patterns which will emerge in Eastern European countries after the Soviet pricing methods have been introduced could, however, be similar to those in the U.S.S.R. only by accident. There are significant differences in the patterns of prices of labor. Therefore, if goods moving in intra-Eastern European trade were to be priced according to the Soviet price pattern, this could not be done by a thoroughgoing application of the Soviet pricing methods in other Eastern European countries. Either the Soviet price pattern or the Soviet pricing methods may be accepted by Eastern European countries. Both cannot be maintained at the same time. The fact that the Eastern European members of the Council of Mutual Economic Assistance are introducing the Soviet pricing methods seems to rule out the possibility, at least for the time being, of a unification of prices.
Therefore, of all the characteristics of an international currency, only the purely technical condition that the ruble shall be related to national currencies through exchange rates can be and is fulfilled. This in itself, without fulfillment of the condition that exchange rates shall be relevant, gives the ruble only the appearance of an international standard of value, and may satisfy only the requirements of prestige. Prices in trade agreements may be expressed in rubles, but these prices will either be agreed arbitrarily or will represent only translations from the prices of Western capitalist countries.
Since it can hardly be expected that the Soviet pricing methods will be changed in the foreseeable future, any spectacular moves of the U.S.S.R. affecting foreign trade and exchange, similar to the latest revaluation of the ruble, would at most mean only an approach to the nominal substitution of the ruble for the U.S. dollar. There is no doubt that the Soviet Union is gradually consolidating the economies of Eastern European members of the Council of Mutual Economic Assistance, and that foreign trade is one of the main instruments of this policy. But it seems evident that this will involve only a consolidation of planning, the pooling of commodities and specialization of production, and that currency considerations will play no active part in it.
Diplomatic exchange rate
Since under the present price patterns in the U.S.S.R. the exchange rate of the ruble must continue to be irrelevant, an improvement in the terms of trade of the U.S.S.R. in relation to Eastern European countries could not have been the aim of the revaluation of the ruble. The terms of trade were, however, improved in relation to all countries by the revaluation of the diplomatic exchange rate. The Soviet Government does not intend to increase its foreign exchange proceeds from tourists, diplomats, etc., and, therefore, could afford to revalue the diplomatic ruble, although it was already greatly overvalued. It is possible, however, that the demand for rubles at the diplomatic exchange rate is already so inelastic that this revaluation will in fact slightly increase total foreign exchange proceeds. At the same time, the revaluation of the ruble may decrease the expenditures of Soviet representatives in Eastern European countries and in Eastern Germany, and reduce the costs of all services bought by them in these countries, which are not covered by clearing trade agreements.
June 1950
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The primary objectives of the Central Bank are to ensure price stability and financial stability.
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ABOUT THE CBA
History
Money circulation in Soviet period
In 1924, the coins were put into circulation in the territory of the Soviet Union. These were of 1, 2, 3 and 5 kopeck denomination in copper; 10, 15, 20 kopeck in base-alloy silver; and 50 kopeck and 1 ruble in silver. Copper coin of the smallest nominal value, the half-kopeck, was issued in 1925-1928.
Starting from 1926, the coins of 1, 2, 3 and 5 kopeck denomination were made of bronze; starting from 1931, the coins of 10, 15 and 20 kopeck denomination were made of copper-nickel alloy.
There were various issues of the USSR banknotes. They originated in 1923 and followed one another in a short period. Both monetary units “ruble” and “chervonets” (1 chervonets was worth 10 ruble) were issued and put into circulation. In 1937, on the occasion of the 20th anniversary of October revolution, for the first time V. Lenin was portrayed on the series of chervonets.
A monetary reform was passed in 1947 with a key objective to promote a quick recovery of the war-suffered economy, and a new series of banknotes of 1, 3, 5, 10, 25, 50 and 100 ruble denomination was issued.
Pic. 1. USSR, banknote of 5 ruble denomination, 1947
In 1961 denomination of currency was implemented (proportion 10:1), and a new series of coins of 1, 2, 3, 5, 10, 15, 20, 50 kopeck and 1 ruble denomination was put into circulation. The series of banknotes consisted of 1, 3, 5, 10, 25, 50 and 100 ruble denomination.
Pic. 2. USSR, banknote of 3 ruble denomination, 1961
Pic. 3. USSR, banknote of 25 ruble denomination, 1961
In 1991, to regulate money circulation, the banknotes of 50 and 100 ruble denomination were withdrawn from circulation and substituted by new ones. Later on, the banknotes of the 1991 series in nominal value 1, 3, 5, 10, 200, 500 and 1000 ruble were put into circulation.
Since January 1992, prices were liberalized, which led to price increases and devaluation of the ruble. The banknotes of 1992 series of 50, 200, 500, 1000, 5000 and 10000 ruble denomination were put into circulation.
More information related to the materials of this Section can be found from literature available in the Library of the Central Bank of Armenia:
Y. T. Nercessian, Bank Notes of Armenia, Armenian Numismatic Society, Los Angeles, 1988
П.Ф. Рябченко, Полный каталог бумажных денежных знаков и бон России, СССР, стран СНГ (1769-1994 гг.), Издательско-культурологический центр “София”, Киев, 1995
R. Vardanyan, G. Mughalyan, A. Vardanyan, A. Zohrabyan, H. Hovhannisyan, The History of Money Circulation of Armenia, Central Bank of the Republic of Armenia, Yerevan, 2018
А. Р. Тевотросян, Бумажные денежные знаки Армении, Авторское издание, Ереван, 2020
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861.13/3–150: Telegram
The Chargé in the Soviet Union (Barbour) to the Secretary of State 1
714. Embtel 704 February 28 and 708, March l.2 In preliminary Embassy opinion, decree Council Minister[s] changing official exchange rates ruble to dollar and other currencies and establishment purported gold basis will have only negligible economic significance outside Soviet orbit except for propaganda. Obviously Soviets will not be able force acceptance ruble rate of exchange in trade with free world.
Principal motive behind move seems to be exploitation weakness western currencies as implied in devaluation and effort compromise dollar to Communist advantage in eyes those who have misgivings western economic stability.
Further considerations, however, probably also involved: Kremlin desire for Soviet currency established on some sort financial parity with currencies freely convertible and having real value has been reflected in post-war speeches and articles Soviet economists who [Page 1115] hopefully referred to “strengthening of ruble in relation foreign currencies” and reiterated ruble has “gold basis”, describing it as “international currency”. Undoubtedly obvious to Kremlin that this phase would not change status ruble from one unacceptable in free international trade to one of desirability and free convertibility. Best Soviets realistically may expect re world trade is to take first step as prelude to creation “ruble area” which they would control. Rumors to this effect have appeared throughout orbit and in Moscow in past months. (Embtel 3022, December 6, ’493)
Additionally, Soviets may hope by describing ruble as based on gold to obviate past embarrassing necessity for publicly stating trade agreements in dollars and defining ruble in terms US dollars.
By basing ruble on gold Soviets imply continued support for gold as international valuta, which understandable since Soviets one of biggest gold producers.
Likewise, by revaluing ruble upward in terms foreign currencies Soviets may have in mind improving trade with satellites although questionable if such device needed with general Soviet control over European satellites now adequate (worth noting that Sino-Soviet trade pact recently signed had special safeguard currency provisions). However, non-satellite countries undoubtedly will ignore claims re ruble value and insist on basing prices on world market prices.
By its action in reducing number of rubles obtainable for hard and soft currencies, Soviets may have considered additional pleasant acquisitions of foreign currency which will accrue to USSR from diplomatic missions on Soviet soil, at same time relieving embarrassment stemming from mere existence diplomatic rate of exchange which confession low purchasing value of ruble. At same time Kremlin may have in mind further curtailment diplomatic missions Moscow and hope additional expenses will force reduction staffs with concomitant improvement Soviet internal security.
In summary Embassy sees principal Soviet advantages decree in internal and external propaganda presuming more gullible sectors world public opinion will be impressed and Soviet populace will take pride in postwar Soviet accomplishments ostensibly reflected therein.
In countering such effect, emphasis on obvious falsity maneuver should go far toward clarifying situation and making evident that with this development Soviet ruble is in fact further from avowed goal becoming internationally accepted valuta than heretofore.
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Russia's ruble worth less than 1 cent after West tightens sanctions
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[] |
[
"Ukraine",
"Russia"
] | null |
[] |
2022-02-28T08:04:00-05:00
|
A sharp fall in Russia's currency could cause inflation in the country to surge and strain its financial system.
|
en
|
https://www.cbsnews.com/news/russia-ukraine-ruble-sanctions/
|
Russia's currency is tumbling after Western nations on Saturday agreed to put crippling sanctions on the country's financial sector in retaliation for its invasion of Ukraine.
The ruble fell about 30% against the dollar Monday — making it worth less than 1 U.S. cent — after the U.S., European Union and United Kingdom announced moves to block some Russian banks from the SWIFT international payment system and to restrict Russia's use of its massive foreign currency reserves. The system is used to move billions of dollars around more than 11,000 banks and other financial institutions around the world.
The ruble recovered ground after Russia's central bank sharply raised its key interest rate Monday to shore up the currency and prevent a run on banks. But it was trading at a record low 105.27 per dollar, down from about 84 per dollar late Friday.
Early Tuesday, the ruble was at 104.51 to the dollar, down 3.2%. The Moscow Stock Exchange was closed again, as it was on Monday.
Ukraine seeks "immediate ceasefire" and Russian withdrawal in 1st direct talks during Putin's ongoing invasion
A weaker ruble could cause inflation to surge, potentially angering Russians whose budgets will be stretched by soaring prices. It will also add to strains across Russia's financial system.
A sharp devaluation of the ruble would mean a drop in the standard of living for the average Russian, economists and analysts said. Russians are still reliant on a multitude of imported goods and the prices for those items are likely to skyrocket. Foreign travel would become more expensive as their rubles buy less currency abroad. And the deeper economic turmoil will come in the coming weeks if price shocks and supply-chain issues cause Russian factories to shut down due to lower demand.
"It's going to ripple through their economy really fast," said David Feldman, a professor of economics at William & Mary in Virginia. "Anything that is imported is going to see the local cost in currency surge. The only way to stop it will be heavy subsidization."
A rapidly depreciating ruble could also slam Russian companies that need to issue debt to raise capital.
"The [ruble] has gone into a tailspin, and most Russian bonds, whether directly sanctioned or not, have seen prices drop to levels suggesting significant risk of default," analysts with TD Securities said in a research note.
Americans barred from transactions
In another move to isolate Russia's financial system, the U.S. Department of Treasury on Monday barred Americans from doing business with Russia's central bank, the country's ministry of finance and its sovereign wealth fund.
"This action effectively immobilizes any assets of the Central Bank of the Russian Federation held in the United States or by U.S. persons, wherever located," the Treasury Department announced.
U.S. officials said Germany, France, the United Kingdom, Italy, Japan, European Union and others will join in targeting the Russian central bank.
Tatiana Orlova of Oxford Economics called the moves partially cutting some Russian banks off from SWIFT and the freezing of its central bank's assets "crushing policies," noting in a report that war in Ukraine is "causing panic among Russian households and businesses."
The Ukraine crisis has caused turbulence in global financial markets. Russia's main equity market, the Moex, remained closed Monday. That appeared to be an effort to stop jittery investors from dumping their shares, according to Nicholas Cawley, strategist at DailyFX.
After surging on Friday on reports that Russian and Ukrainian leaders would meet this week, U.S. stocks were set Monday to open lower. Delegates from the two countries sat down Monday for their first direct negotiations since Russia launched its invasion five days earlier.
Capital Economics estimated in a report that Russia's gross domestic product is likely to shrink roughly 5% as a result of the sanctions on the country's economy.
People wary that sanctions would deal a crippling blow to the economy have been flocking to banks and ATMs for days, with reports in social media of long lines and machines running out of cash. Moscow's department of public transport warned city residents over the weekend that they might experience problems with using Apple Pay, Google Pay and Samsung Pay to pay fares because VTB, one of the Russian banks facing sanctions, handles card payments in Moscow's metro, buses and trams.
The Russian government will have to step in to support declining industries, banks and economic sectors, but without access to hard currencies like the U.S. dollar and euro, they may have to result to printing more rubles. It's a move that could quickly spiral into hyperinflation.
To halt the slide in the ruble, Russia's central bank on Monday hiked the benchmark interest rate to 20% from 8.5%. That followed a Western decision Sunday to freeze Russia's hard currency reserves, an unprecedented move that could have devastating consequences for the country's financial stability.
"With it now uncertain if Russia can even get their hands on their large stock of [foreign exchange] reserves (whatever the denomination), are sovereign bond holders going to get paid back?" Peter Boockvar, chief investment officer with Bleakley Advisory Group, said in a report to investors. "With the rubble down 19% today to a fresh record low against the dollar, good luck getting paid back if one holds a dollar denominated Russian bond."
The ruble lost much of its value in the early 1990s after the end of the Soviet Union, with inflation and loss of value leading the government to lop three zeros off ruble notes in 1997. Then came a further drop after a 1998 financial crisis in which many depositors lost savings and yet another plunge in 2014 due to falling oil prices and sanctions imposed after Russia seized Ukraine's Crimea peninsula.
It was unclear exactly what share of Russia's estimated $640 billion hard currency pile, some of which is held outside Russia, would be paralyzed by the decision. European officials said that at least half of it will be affected. That dramatically raised pressure on the ruble by undermining financial authorities' ability to support it by using reserves to purchase rubles.
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9245
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dbpedia
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2
| 49
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https://www.toppr.com/ask/question/the-currency-of-russia-is-called/
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en
|
The currency of Russia is called.PoundLiraYenRuble
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[] |
[] |
[] |
[
""
] | null |
[
"Toppr"
] |
2020-01-09T00:00:00
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Click here:point_up_2:to get an answer to your question :writing_hand:the currency of russia is called
|
en
|
/ask/images/favicon.ico
|
Toppr Ask
| null |
The ruble was the currency of the Russian Empire and of the Soviet Union However, today only Russia, Belarus and Transnistria use currencie with the same name. The ruble was the first currency in Europe to be decimalised, in 1704, when the ruble became equal to 100 kopeks. In 1992 the Soviet ruble was replaced with the Russian ruble at the rate 1 SUR = 1 RUR. In 1998 preceding the financial crisis, the Russian ruble was redenominated with the new code "RUB" and was exchanged at the rate of 1,000 RUR = 1 RUB.
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9245
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0
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https://www.economicsobservatory.com/russias-1998-currency-crisis-what-lessons-for-today
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en
|
Russia's 1998 currency crisis: what lessons for today?
|
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[] |
[] |
[
""
] | null |
[
"Christopher Coyle"
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2022-05-16T00:00:00+00:00
|
In 1998, Russia experienced sovereign debt default, a massive devaluation of the rouble and a banking crisis. Triggered by the invasion of Ukraine, the currency’s value has again tumbled – and this crisis may be longer lasting and more severe without a move towards peace.
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en
|
Economics Observatory
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https://www.economicsobservatory.com/russias-1998-currency-crisis-what-lessons-for-today
|
Following Russia’s invasion of Ukraine in February 2022, the value of the Russian rouble relative to the US dollar fell by over 40% in just two weeks. A depreciation of such scale would be extraordinary for most countries, but this is not the first significant currency devaluation that Russia has faced in its recent history.
In 1998, Russia experienced a major currency crisis when the rouble lost over two-thirds of its value in three weeks, as well as a default on its sovereign debt and a banking crisis. Are there any lessons from that crisis that are relevant today?
Figure 1: USD/RUB exchange rate, January 1995-April 2022
Source: Bloomberg
Background and causes of the 1998 rouble crisis
The fall of the Soviet Union in 1991 preceded several years of economic reform, privatisation and macroeconomic stabilisation policies in Russia. A central element of this was the adoption of a currency peg – a type of exchange rate regime in which a currency's value is fixed against the value of another currency.
This meant that the value of the rouble relative to the dollar was constant and only allowed to fluctuate within a narrow band. The Bank of Russia would intervene by buying and selling the rouble as necessary to maintain the exchange rate.
The Russian economy was also supported by financial aid from the World Bank and the International Monetary Fund (IMF), while negotiations to repay foreign debt inherited from the Soviet Union improved investor confidence (Chiodo and Owyang, 2002).
In the first quarter of 1997, foreign investment in Russia rose sharply with the relaxation of restrictions on foreign portfolio investment. But investor expectations soon changed following the Asian financial crisis, which began with the collapse of the Thai baht in July 1997. This crisis quickly spread to other Asian currencies and by November, the rouble also came under attack by speculators (Chiodo and Owyang, 2002).
Despite the reforms introduced since 1991, fundamental institutional weaknesses remained in Russia (Sutela, 1999; Chiodo and Owyang, 2002). These weaknesses were highlighted and exacerbated by the financial crisis in Asia.
A global recession and a fall in commodity prices compounded weak tax enforcement in Russia and an expensive war in Chechnya. This led to fiscal imbalances and raised questions about the government’s ability to pay its sovereign debts and maintain a fixed exchange rate (Desai, 2000; Kharas et al, 2010). This increase in default and exchange rate risk made capital flight from Russia and a devaluation of the rouble more likely.
In an attempt to encourage investors to hold rouble-denominated assets and support the fixed exchange rate, the Bank of Russia increased interest rates to 150%.But this meant that by July 1998, interest payments on Russia’s debt were 40% higher than the country’s tax collection. This had the effect of further eroding investor confidence and creating downward pressure on the currency.
In early August 1998, driven by fears of a default on domestic debt and a rouble devaluation, the Russian stock, bond and currency markets all came under severe pressure. Trading on the stock market was suspended for 35 minutes due to sharp falls in prices.
Then on 17 August, the government announced a devaluation of the rouble’s pegged exchange rate, a default on its domestic debt and a 90-day suspension on payments by commercial banks to foreign creditors.
Two weeks later, on 2 September, the Bank of Russia abandoned its efforts to maintain a fixed exchange rate and allowed the rouble to float freely. In three weeks, the currency had lost about two-thirds of its value (Kharas et al, 2010).
Consequences and recovery
There were significant domestic and international consequences of these events. The currency crisis and associated financial market turmoil contributed to a recession and contraction of the Russian economy by 5.3% in 1998, with GDP per capita reaching its lowest level since the formation of the Russian Federation in 1991.
Inflation in 1998 was 84% because of rouble depreciation, contributing to a dramatic fall in real wages and social unrest. Workers staged strikes and large scale protests, including demonstrations in front of the Russian White House.
Increased political instability followed: both the prime minister and central bank governor were replaced; the new prime minister’s first budget was rejected; and the president’s popularity collapsed (Desai, 2000). In August 1999, within a year of the crisis, Vladimir Putin became the fifth prime minister in 12 months.
The crisis also had a significant effect on financial markets globally. Russia’s sovereign default was the largest in history at the time and contributed to the collapse of the LTCM (Long Term Capital Management) hedge fund in the United States, which required a $3.6 billion bailout. This led to substantial spillover effects in international markets (Dungey et al, 2002).
The Russian economy recovered relatively quickly from the 1998 crisis, growing by 6.4% in 1999 and 10% in 2000. The sharp depreciation of the rouble made Russian exports attractive internationally and, combined with an increase in oil income, helped to stimulate the economic recovery. Sovereign debt restructuring and an IMF loan of $4.8 billion helped Russia to regain access to international financial markets.
Lessons for today
It is important to note that the forces driving the 1998 crisis and today’s crisis are very different, both politically and economically. Yet there may be fundamental lessons about how crises evolve and their implications.
First, currency crises can be triggered by events that increase a country’s risk, reduce investor confidence and change expectations of a country’s economic outlook, causing capital flight.
As in 1998, the devaluation of the rouble in 2022 was fundamentally triggered by a large increase in Russia-related risk, although the source of this was very different in each case.
Second, currency crises often go hand-in-hand with other financial crises, such as sovereign debt defaults, stock market crashes and banking crises, and can lead to higher inflation and interest rates. These have important implications and in 1998, they culminated in a sharp increase in the cost of living, recession, social unrest and political instability in Russia.
The full extent of financial market difficulties in Russia today has, so far, been moderated by extensive government restrictions. Nevertheless, interest rates have already increased from 9.5% to 20%, before being reduced to 14%, and inflation had accelerated to 16.7% by March.
Further economic difficulties may still unfold in Russia, particularly as there is currently no sign of political risk abating as the war continues and sanctions increase. But a default on Russian foreign debt seems increasingly likely and a deep recession appears certain.
As in 1998, this may have implications for social and political stability. It has been shown that approval ratings of political leaders in Russia have tracked citizens’ perceptions of the state of the economy since 1991 (Treisman, 2011).
The 1998 crisis illustrates that economic shocks can reverberate throughout global financial markets. Today, many countries are experiencing rising inflation and weaker growth as a direct result of the war in Ukraine, with rising interest rates likely to follow. Numerous international companies have written down investments in Russia.
In contrast to 1998, Russia has adopted a floating exchange rate in recent years, which means that capital flight from the country should immediately be reflected in the exchange rate. Despite this and in contrast to 1998, the rouble exchange rate has recovered rapidly from its initial fall in early March 2022.
Rather than a reflection of reduced risk or increased investor confidence in the Russian economy, this recovery highlights Russia’s success at supporting the rouble with government interventions. These include trading restrictions, capital controls, increased interest rates and government requirements for business to hold 80% of overseas revenue in roubles.
This means that the rouble is no longer freely convertible and its value now tells us little about the reality of the Russian economy.
Notably, Russia was able to recover quickly from the 1998 crisis thanks to the stimulatory effect of the weaker rouble, increased oil revenue and help from the West in the shape of IMF loans. The rapid recovery of the rouble exchange rate in March 2022 combined with increasing international sanctions means that the expansionary forces that enabled a quick recovery from the 1998 crisis seem extremely unlikely today.
These lessons suggest that the full economic effects of recent events in Russia are yet to unfold, and without a move towards peace and geopolitical normalisation, the impact will be longer and more severe than in 1998.
Where can I find out more?
Currency crises in emerging markets: Council on Foreign Relations explainer on currency crises.
Has financial collapse saved Russia?: Anders Åslund on Russia’s 1998 crisis and recovery.
The price of war: Macroeconomic effects of the 2022 sanctions on Russia: Anna Pestova, Mikhail Mamonov and Steven Ongena on the economic effects on the Russian economy.
Economic spillovers from the war in Ukraine: The proximity penalty: Jonathan Federle, André Meier, Gernot Müller and Victor Sehn on stock market reactions to the invasion of Ukraine.
Russian consumers are already feeling the cost of war: The Economist compares current Russian inflation with the 1998 crisis.
The economic consequences of the war in Ukraine: The Economist on the geopolitical risk and economic consequences.
Who are experts on this question?
Paul Krugman
Maurice Obstfeld
Sergei Guriev
Daniel Triesman
Anders Åslund
Author: Christopher Coyle
Photo by ArtemSam from iStock
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https://www.ecb.europa.eu/press/other-publications/ire/html/ecb.ire202306~d334007ede.en.html
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en
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The international role of the euro, June 2023
|
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[] |
[] |
[
""
] | null |
[
"European Central Bank"
] |
2023-06-21T00:00:00
|
The European Central Bank (ECB) is the central bank of the European Union countries which have adopted the euro. Our main task is to maintain price stability in the euro area and so preserve the purchasing power of the single currency.
|
en
|
/fav.ico
|
European Central Bank
|
https://www.ecb.europa.eu/press/other-publications/ire/html/ecb.ire202306~d334007ede.en.html
|
Foreword
Despite a succession of new shocks, the international role of the euro remained resilient in 2022. This was a year that saw the onset of Russia’s war in Ukraine, a rise in economic sanctions and a substantial increase in geopolitical risks – all with potential repercussions for the international monetary system. However, the share of the euro across various indicators of international currency use continued to average close to 20%. The euro remained the second most important currency globally.
This resilience was noteworthy in a context of rising inflationary pressures worldwide – in part owing to war-related energy and food price increases – which led to tighter monetary policies across major economies and higher interest rates on the main international currencies.
But there are developments ahead to monitor for the euro as an international currency. This year’s report discusses the future of the international monetary system following Russia’s invasion of Ukraine, reviewing the available evidence. So far, the data do not show substantial changes in the use of international currencies. However, they do suggest that international currency status should not be taken for granted.
This new landscape increases the onus on European policymakers to create the conditions for the euro to thrive. Its international role is primarily supported by a deeper and more complete Economic and Monetary Union (EMU), including advancing the capital markets union, in the context of the pursuit of sound economic policies in the euro area. The Eurosystem supports these policies and emphasises the need for further efforts to complete EMU. Further European economic and financial integration will be pivotal in increasing the resilience of the international role of the euro in a potentially more fragmented world economy.
The ECB will continue to monitor developments and publish information on the international role of the euro on a regular basis.
Christine Lagarde
President
1 Main findings
This 22nd annual review of the international role of the euro presents an overview of developments in the use of the euro by non-euro area residents. The report covers developments in 2022. This was a year that saw the onset of Russia’s war in Ukraine and a substantial increase in geopolitical risks with potential repercussions for the international monetary system. Rising inflationary pressures globally – in part coming from war-related energy and food price increases – and tighter monetary policies in major economies led to higher interest rates on the main international currencies.
Against this challenging background, a composite index of the international role of the euro remained resilient over the review period (Chart 1). Adjusting for exchange rate valuation effects, the index increased by around 1.3 percentage points. At current exchange rates, it remained largely unchanged. The share of the euro across various indicators of international currency use averaged close to 20%. The euro remained the second most important currency in the international monetary system (Chart 2).
Chart 1
The international role of the euro was resilient in 2022
Chart 2
The euro remained the second most important currency in the international monetary system
The share of the euro in global official holdings of foreign exchange reserves increased in 2022 by 0.5 percentage points to 20.5%, when measured at constant exchange rates (Table 1). The share of the US dollar declined by more than 2 percentage points, while the share of the renminbi was substantially unchanged. Box 1 examines whether the renminbi could play a stronger role as an international reserve currency despite China’s lack of full financial account openness. A strong dollar and large changes in the price of bonds issued by major economies encouraged official reserve managers to manage their portfolios actively in 2022. Net official purchases of assets denominated in currencies other than the US dollar increased, offsetting valuation effects arising from the dollar’s appreciation – which mechanically raised the share of the US dollar in official reserve portfolios at current exchange rates. Whether inflation developments influenced the decisions of official foreign exchange reserve investors is unclear, as shown by the poor correlation between changes in the share of major currencies in global foreign exchange reserves and inflation rates in the issuing economies. Box 3 discusses how these developments are not exceptional and reflect conventional reserve management strategies by central banks. Interest rates are another factor which can influence the management of reserve portfolios. While interest rates in the euro area returned to positive territory, they remained lower than in other major economies, which could have discouraged rebalancing to euro-denominated assets. Box 2 shows that interest rate differentials are important determinants in the active rebalancing of the government debt portfolios of a sample of US mutual fund managers, much as they influence investment decisions of official reserve managers.[1] Finally, heightened geopolitical risks might have played a role in the investment decisions of official reserve managers in some countries. Special Feature A shows that the accumulation of gold as an official reserve asset was especially strong in countries that are geopolitically close to China and Russia. This may be because such countries are looking to reduce their exposure to the risk of financial sanctions. Higher inflation globally might confound these developments, however, insofar as gold is traditionally seen as a hedge against inflationary risks.
Other indicators of the international role of the euro tracked in this report also point to a noteworthy resilience in the attractiveness of the euro (Table 1). The share of the euro in the outstanding stock of international debt securities increased by more than 1 percentage point to 22.0% in 2022 compared with the previous year, when measured at constant exchange rates. The shares of the euro in the outstanding stocks of international loans and international deposits rose by around 2.4 and 1.5 percentage points, respectively, in 2022. The share of the euro in foreign exchange settlements also increased by almost 3 percentage points to around 38%, when measured at constant exchange rates, over the review period. However, the latest BIS Triennial Survey points to a decline in the share of the euro in global foreign exchange turnover of around 1.8 percentage points since 2019, to 30.5%, owing to the relatively stronger growth of trading in other currencies, such as the US dollar and the renminbi. Box 4 shows that the City of London remained the main venue for foreign exchange trading in euro and that the United Kingdom’s importance for international financial activities in euro did not change materially after Brexit, albeit with a few exceptions. The international role of the euro in foreign currency bond issuance, including the issuance of international green bonds, was substantially stable. Finally, the share of the euro in the invoicing of extra-euro area imports and exports did not change significantly. The impact of Russia’s war in Ukraine on the international role of the euro was particularly visible in the form of a temporary surge in net shipments of euro cash outside the euro area, presumably for precautionary reasons (Box 5). This reversed in the second half of 2022 on the back of higher interest rates and opportunity costs of holding cash (Section 2.5).
As stressed in last year’s edition of this report, the European Union’s economic and financial resilience to the current geopolitical challenges underlines the strength of the international role of the euro. The international role of the euro is primarily supported by a deeper and more complete Economic and Monetary Union (EMU), including advancing the capital markets union, in the context of the pursuit of sound economic policies in the euro area. The Eurosystem supports these policies and emphasises the need for further efforts to complete EMU.
This year’s report includes three special features. The first special feature sheds light on the debate surrounding the future of the international monetary system following Russia’s invasion of Ukraine, reviewing the available evidence. Shortly after the invasion, several packages of sanctions were imposed on Russia, including the freezing of nearly half of the Russian central bank’s foreign exchange reserves and the exclusion of several Russian banks from SWIFT, the dominant financial messaging system for cross-border payments. Some observers noted that these sanctions may encourage countries that are not fully aligned with the United States geopolitically to cut their exposures to the currencies of sanctioning countries, while others were more sceptical and pointed to challenges in moving away from the major international currencies. The special feature shows that evidence of a potential fragmentation of the international monetary system since Russia’s invasion is so far mainly restricted to announcements and specific cases and is not indicative of broader trends. Anecdotal evidence, including official statements, points to the intention of some countries to develop the use of alternatives to the sanctioned currencies, such as the renminbi, the rouble and the Indian rupee, for the invoicing of international trade – notably in commodities. There is also evidence that Russia has been using the Chinese renminbi to a significantly greater extent for international invoicing and cross-border payments in the past few months. However, on the whole, the available data do not show substantial changes in the use of international currencies. One noteworthy development is evidence of diversification into gold by countries that are geopolitically close to China and Russia, perhaps in an attempt to reduce their risk of exposure to sanctions.
The second special feature aims to give a broader perspective to ongoing discussions on the future of the international monetary system and reviews the evidence – both old and new – on how one leading international currency is replaced by another. The conventional historical narrative is that inertia in international currency use is substantial – it takes a long time for a challenger currency to replace the incumbent unit as the presence of network externalities gives rise to lock-in effects. However, one interesting exception is the invoicing of trade by countries neighbouring the euro area, where the euro overtook the US dollar in the space of a few years, i.e. between 1999 – the year of the euro’s creation – and 2019. Two competing hypotheses may explain these developments: a trade shock – in which stronger trade links with the euro area tilted invoicing towards the euro – and an exchange rate volatility shock – in which growing use of the euro as an exchange rate anchor spilled over to invoicing. New evidence from ECB staff research gives support to the first hypothesis, finding that a trade shock is a key determinant of the stronger role of the euro for invoicing international trade in countries neighbouring the euro area. In countries where trade links with the euro area increased, the shock accounts for almost 40% (on average) of the rise in the share of exports invoiced in euro between 1999 and 2019. By contrast, the impact of greater exchange rate stability against the euro is found to be statistically insignificant. Moreover, the estimates point to significant cross-country effects – the fact that countries’ invoicing currency choices are not just impacted by their own trade patterns and exchange rate volatilities, but also by those of their trade partners and competitors. These findings have implications for policy. They suggest that in response to the pandemic shock and the war in Ukraine, the reshoring or “friendshoring” of production chains could lead to stronger regional trade, notably on the European continent and, in turn, to a stronger role of the euro for invoicing international trade, with the caveat that such a reversal in global economic integration would bring other economic costs.
The third special feature looks at the role of international currencies in global finance. It provides insights into determinants of currency choice in cross-border bank lending, including bilateral distance, measures of linkages to the issuer countries through finance, trade and the use of vehicle currencies for trade invoicing. The special feature pinpoints several new facts. It highlights the centrality of the City of London for euro-denominated loans, albeit with tentative signs of adverse Brexit effects. It shows that offshore financial centres play a pivotal role in the international network of cross-border loans denominated in US dollars, which largely reflects lending to non-bank financial intermediaries (such as investment banks, finance companies, mutual funds, pension funds and insurance companies) in the Cayman Islands. Moreover, empirical estimates suggest that euro-denominated loans are driven by gravity effects, pointing to a stronger role of the euro in the immediate vicinity of the euro area, in contrast to US dollar loans which have a more global outreach. Finally, there is evidence that complementarity effects between trade invoicing and bank lending decisions – which are predicted to be significant according to recent theoretical models of international currency use – are stronger for the euro than for the US dollar.
Table 1
The international role of the euro from different perspectives
2 Key developments
2.1 Use of the euro as an international reserve and investment currency
The share of the euro in global official holdings of foreign exchange reserves increased in 2022 when measured at constant exchange rates. At the end of 2022, official investors held about €11.4 trillion (USD 12.0 trillion) in foreign exchange reserves. Total foreign exchange reserves declined by more than 7 percentage points, when measured at current exchange rates, compared with the previous year (Table 1). The share of the euro in global official holdings of foreign exchange reserves increased by 0.5 percentage points to 20.5% in 2022 when measured at constant exchange rates (Chart 3). By contrast, the share of the euro remained broadly stable, declining by about 0.1 percentage points, when measured at current exchange rates (Chart 5). Overall, in the past seven years the share of the euro in global official holdings of foreign exchange reserves has remained within a relatively narrow range.
Chart 3
The share of the euro in global official holdings of foreign exchange reserves increased in 2022
Interest rates and fixed-income yields on highly-rated euro area government bonds turned positive in 2022, although they remained lower than in other major economies. Interest rate differentials with other major advanced economies widened over the course of 2022, except with Japan. For instance, euro area long-term interest rates remained lower by around 200 basis points compared with the United States and about 150 basis points compared with the United Kingdom, which could have discouraged rebalancing to euro-denominated assets (Chart 4). Box 2 shows how interest rate differentials are important determinants of active rebalancing for US mutual fund managers across currencies within their portfolios of government debt securities,[3] which is consistent with evidence from the literature for official reserve managers.[4]
Chart 4
Average interest rates in the euro area in positive territory but lower than in several advanced economies in 2022
A strong dollar and rising policy interest rates encouraged official reserve managers to manage their portfolios actively in 2022, to a large extent offsetting the valuation effects arising from exchange rate and bond price movements. In 2022 the share of the US dollar – the major global reserve currency – remained stable at around 58.4%, when measured at current exchange rates, although it declined by about 2.2 percentage points at constant exchange rates. Reserve managers sold an estimated USD 293 billion of US dollar assets in the review period. Net purchases of currencies other than the US dollar largely offset the impact of valuation effects stemming from the US dollar’s appreciation – which mechanically raises the share of the US dollar in official reserve portfolios. Net purchases of euro-denominated reserves by official investors reached an estimated €50 billion (USD 53 billion) in the review period.[5] Not only did the share of the euro increase at constant exchange rates but also the share of currencies other than the euro and the US dollar – by about 1.7 percentage points in the review period (Chart 3). In particular, the share of official reserve assets denominated in Japanese yen and pound sterling both increased by 0.5 percentage points, while the share of other major reserve currencies remained broadly stable (Chart 5). These developments are not exceptional and reflect conventional reserve management strategies by central banks. During periods of strong dollar appreciation reserve managers tend to stabilise the composition of their portfolios by selling dollar assets and purchasing assets in other major currencies, such as the euro (Box 3). In addition, foreign exchange interventions aiming at stabilising the exchange rate of the domestic currency against the US dollar or limiting its volatility become more likely when the US dollar appreciates, particularly in emerging markets, explaining net sales of US dollar-denominated reserve assets. According to a regular survey conducted by the investment bank UBS, rising interest rates in the US and inflation represented one of the main concerns for the investment of foreign exchange reserves.[6] The extent to which current inflation developments influenced the decisions of official foreign exchange reserve investors is not entirely clear as shown by the limited correlation between changes in the share of major currencies in global foreign exchange reserves and inflation rates in the issuing economies in 2022 (Chart 6).
Chart 5
Official reserve managers tried to manage their portfolios actively to offset the effects of a strong US dollar
Chart 6
Inflation developments are uncorrelated with changes in the currency composition of foreign exchange reserves
2.2 The euro in global foreign exchange markets
The euro remained the second most actively traded currency in global foreign exchange markets after the US dollar. The share of the euro in global foreign exchange settlements increased slightly in 2022, according to data from the CLS system, standing at almost 38% in the fourth quarter of 2022 (Chart 7, panel a) – an increase of almost 3 percentage points from the previous year when measured at constant exchange rates.[10] By contrast, the share of the US dollar decreased by more than 6 percentage points, although the US dollar remained the leading currency in global foreign exchange settlements – being involved in almost 90% of all settlements in the fourth quarter of 2022.[11] Volumes of euro settlements increased by over 20% in the fourth quarter of 2022 compared with the previous year, consistent with trends in the past few years (Chart 7, panel b).
The latest evidence from the Triennial Central Bank Survey of foreign exchange and over-the-counter (OTC) derivatives markets, conducted by the BIS in April 2022, showed that the share of the euro decreased by 1.8 percentage points compared with the previous survey conducted in 2019 (Chart 8, panel a).[12] Global foreign exchange turnover increased by 14% compared with 2019, reaching USD 7.5 trillion. Overall, the US dollar remained the most used currency, being on one side of almost 90% of total OTC transactions, a share that is broadly stable compared with earlier surveys. Meanwhile, the euro was used in 31% of all trades, thereby remaining the second most actively traded currency.[13] Volumes of OTC trade in euro increased by USD 167 billion (or about 8%) relative to 2019, compared with even stronger increases for the US dollar and the Chinese renminbi of USD 830 billion (or about 14%) and USD 241 billion (or about 85%) respectively. The Chinese renminbi thus exhibited the largest increase in market share since the 2019 survey, being on one side of 7% of all trades in 2022 (up from 4% in 2019) to become the fifth most traded currency. The Japanese yen and pound sterling were on one side of 17% and 13% of all trades respectively, largely unchanged compared with the previous survey. Global foreign exchange trading activity involving the euro is concentrated in the United Kingdom, which accounts for more than 42% of total trading, as well as in the United States, the euro area, Hong Kong SAR, Singapore and Switzerland (Chart 8, panel b). Relative to the 2019 survey, euro foreign exchange (FX) trading activity in the United Kingdom contracted by 6 percentage points, standing close to the level prevailing at the time of the 2016 Brexit referendum.
Chart 7
The euro remained the second most important currency in global foreign exchange settlements
Chart 8
The share of the euro in global OTC transactions decreased slightly in the latest BIS Triennial Survey compared with the previous survey
2.3 Use of the euro in international debt and loan markets
2.3.1 The euro in international debt markets
The share of the euro in the stock of international debt securities increased in 2022.[14] When measured at constant exchange rates, the share of the euro in the stock of international debt securities stood at 22%, increasing by 1.2 percentage points in the review period. The share of the euro remains about 8 percentage points lower than its peak in the mid-2000s. By contrast, the share of the US dollar declined by about 1.2 percentage points, although it remains the leading currency in the international debt security markets, accounting for more than 65% of the global stock (Chart 9 and Table A4).
Chart 9
The share of the euro in the stock of international debt securities increased in 2022
Granular data on international issuance of foreign currency-denominated bonds suggest that the volume of international bond issuance decreased markedly in 2022.[15] In 2022 the total volume of foreign currency-denominated bond issuance contracted by more than USD 700 billion, corresponding to a decline of 30% in relative terms over the review period. This decline occurred amid market concerns about the economic outlook, tighter financial conditions in advanced economies and geopolitical fragmentation risks (Special Feature A). In particular, the issuance of euro-denominated bonds decreased by about 30% in 2022 compared with the previous year, standing at €377 billion (USD 397 billion). However, the share of the euro in foreign currency-denominated bond issuance remained stable, at around 25% (Chart 10, panel a). Issuance of US dollar-denominated bonds (USD 930 billion in 2022) fell more markedly, by around 36% year on year, reducing the share of the dollar in international bond issuance by 5 percentage points.[16] Despite these developments, the US dollar remains by far the leading currency for international issuance of foreign currency-denominated bonds, accounting for more than 57% of total issuance in the review period (Chart 10, panel b). Notably, the share of currencies other than the US dollar and the euro increased to around 17%.
Chart 10
The share of the euro in international issuance of foreign currency-denominatedbonds remained stable in 2022
The retrenchment in euro-denominated international bond issuance was mainly driven by lower issuance in the United Kingdom, the United States and emerging markets. Issuance of euro-denominated international bonds contracted by 72% among emerging market economies in 2022 and by more than 40% in the United States, the United Kingdom and Japan (Chart 11, panel b). At the same time, in non-euro area EU Member States and other advanced economies, issuance of euro-denominated bonds increased by 6 and 8 percentage points respectively. Issuance of US dollar-denominated bonds in emerging market economies declined by 55% (Chart 11, panel a).[17] The retrenchment might have arisen from higher interest rates and financing costs in advanced economies, combined with heightened volatility in bond markets. This might have in turn dampened demand for foreign currency-denominated debt issued by emerging market economies. The impact of Brexit on the role of the City of London as a centre for the intermediation of foreign currency-denominated funding might also explain the lower issuance of euro and US dollar-denominated debt in the United Kingdom (Box 4).
Chart 11
Issuance of euro and US dollar-denominated bonds declined in emerging market economies in 2022
International issuance of green bonds also decreased substantially in the review period.[18] In absolute terms, the amount of international green bonds issued in major currencies contracted by about USD 41 billion (Chart 12, panel a). Issuance of green bonds denominated in euro decreased by €11 billion (USD 12 billion) for a total issuance of about €34 billion (USD 36 billion) in 2022. US dollar-denominated issuance also fell from USD 80 billion to USD 59 billion. In relative terms, the shares of euro and US dollar-denominated green bonds remained stable, with the two currencies accounting for about 31% and 51% of total issuance respectively.
Chart 12
International green bond issuance retrenched in 2022, although the share of the euro in total issuance remained stable
2.3.2 The euro in international loan and deposit markets
The share of the euro in the outstanding stock of international loans continued to increase in 2022. Euro-denominated international loans increased by about 2.4 percentage points in the review period, when measured at constant exchange rates (Chart 13 and Table A6).[19] The share of the euro in 2022, at around 19%, is close to its historical peak of about 20% seen in 2005. By contrast, the share of the US dollar in international loan markets continued to decline, although the US dollar remains the leading currency in international loan markets by a large margin, accounting for about 53% of total loans. Geographical distance or complementarities with trade invoicing patterns tend to affect demand for euro-denominated and, to a lesser extent, dollar-denominated international loans (Special Feature C).
Chart 13
The share of the euro in outstanding international loans remained close to historical peaks
The share of outstanding international deposits denominated in euro continued to increase in 2022. The share of the euro rose by about 1.5 percentage points over the review period, when measured at constant exchange rates, standing at almost 18% (Chart 14 and Table A7).[20] By contrast, the share of US dollar-denominated deposits declined by about 1.4 percentage points in 2022 as investors reduced holdings of dollar-denominated deposits accumulated as liquid balances during the pandemic.[21] However, despite a marginal decline in 2022, the share of US dollar-denominated international deposits remained close to pre-pandemic levels, at around 52% of total international deposits.
Chart 14
The share of the euro in outstanding international deposits increased further in 2022
2.4 Use of the euro as an invoicing currency
The share of the euro as an invoicing or settlement currency for extra-euro area trade, in particular services exports, remained broadly stable in 2022. Extra-euro area exports of goods invoiced in euro declined by half a percentage point in 2022 to around 59%, while the share of extra-euro area imports of goods invoiced in euro also dropped by half a percentage point to below 52% (Chart 15, panel a and Table A8). However, such changes remain marginal and, from a long-term perspective, the role of the euro as an invoicing currency for trade in goods remains by and large unchanged. Almost 58% of extra-euro area services exports were invoiced in euro in 2022, down from around 60% in the previous year. The share of exports of services invoiced in euro, similar to the euro-invoiced share of exports of goods, also reached a historical low, continuing the downward trend seen since 2018. Likewise, just below 53% of extra-euro area imports of services were invoiced in euro in 2022, down by about 0.3 percentage points compared with the previous year (Chart 15, panel b).
Chart 15
The share of euro as an invoicing currency of extra-euro area trade in goods and services was broadly stable in 2022
2.5 Use of euro banknotes outside the euro area
Cumulative shipments of euro banknotes to destinations outside the euro area decreased to a ten-year low in 2022. The value of net registered shipments of euro banknotes to destinations outside the euro area declined by about 11% over the review period, the largest year-on-year decline since the launch of the euro (see Chart 16).
Chart 16
Net extra-euro area shipments of euro banknotes saw an unprecedented decline in 2022
However, developments in shipments of euro banknotes outside the euro area differed markedly between the first half and second half of 2022. In the first half of the year, the value of net registered shipments of euro banknotes to destinations outside the euro area increased by around 8%. This surge in demand for euro cash was likely caused by the outbreak of Russia’s war in Ukraine which spurred precautionary demand for euro banknotes in a number of central and eastern European countries outside the euro area neighbouring Ukraine (Box 5 on the impact of Russia’s war in Ukraine on foreign demand for euro cash).
In the second half of 2022, net shipments of euro banknotes to destinations outside the euro area decreased markedly as a result of two factors. First, the beginning of monetary policy normalisation by the ECB led to an associated rise in opportunity costs of holding cash and may have encouraged decreases in cash holdings. In anticipation of the increase in ECB policy rates in July 2022, net shipments decreased by around 4% month-on-month – an unprecedented deceleration – followed by significant banknote purchases in the subsequent months. Second, geopolitical developments likely reduced sales of euro banknotes to eastern European countries outside the EU significantly. These countries accounted for 15% of total sales in 2022, compared with almost 30% in 2021 (Chart 17, panel a).
Chart 17
In 2022 euro banknotes were mainly exported to and imported from countries neighbouring the euro area
3 Special features
A Geopolitical fragmentation risks and international currencies
By Tamar den Besten, Paola Di Casola, Maurizio Michael Habib
Shortly after Russia invaded Ukraine, several packages of unprecedented sanctions were imposed on Russia, including the freezing of nearly half of the Russian central bank’s foreign exchange reserves and the exclusion of a number of Russian banks from SWIFT, the dominant financial messaging system used to facilitate cross-border payments. Several observers noted that these sanctions may have far-reaching consequences for the role of the currencies of the sanctioning countries – including the US dollar and the euro – in the international monetary and financial system. According to these observers, countries that are not fully aligned geopolitically with the United States might reduce their exposures to the currencies of sanctioning countries going forward. However, other observers have been more cautious and pointed to challenges involved in diversifying from the major international currencies. This special feature sheds light on this debate by reviewing the available evidence on the effects of geopolitical fragmentation risks on the use of international currencies. It shows that evidence of potential fragmentation in the international monetary system since Russia’s invasion has so far been mainly restricted to announcements and specific cases rather than pointing to broader trends. Anecdotal evidence, including official statements, points to intentions of some countries to develop the use of alternatives to major traditional currencies, such as the Chinese renminbi, the Russian rouble or the Indian rupee for invoicing international trade. There is also evidence that Russia has been using the Chinese renminbi to a significantly greater extent for international invoicing and cross-border payments in the past few months. However, the available data do not show substantial changes in the use of international currencies as yet. One exception is evidence of increased accumulation of gold as an alternative reserve asset, possibly driven by countries geopolitically closer to China and Russia.
More
B How is a leading international currency replaced by another? Old versus new evidence
By A. Mehl, M. Mlikota (University of Pennsylvania) and I. Van Robays
This special feature reviews the evidence – both old and new – on how a leading international currency is replaced by another. The conventional historical narrative is that inertia in international currency use is substantial – it takes a long time for a challenger currency to replace the incumbent owing to the existence of network externalities that give rise to lock-in effects. The US dollar remains the leading currency for global trade and finance today, despite the decline in the United States’ share of global output and trade, which testifies to the importance of inertia. However, one interesting exception is the currency invoicing of trade of countries neighbouring the euro area between 1999 – the year of the euro’s creation – and 2019, when the share of the euro increased by more than 20 percentage points on average, at the expense of the US dollar.
Two competing hypotheses may explain these developments: a trade shock – where stronger trade links with the euro area tilt invoicing towards the euro – and an exchange rate volatility shock – where growing use of the euro as an exchange rate anchor spills over to invoicing. Recent evidence from ECB staff research empirically tests the relative importance of these two shocks. The estimates give support to the view that a trade shock is a key determinant of the stronger role of the euro for invoicing international trade in countries neighbouring the euro area. In those countries where trade links with the euro area increased, the shock explains on average almost 40% of the rise in the share of exports invoiced in euro between 1999 and 2019. By contrast, the impact of greater exchange rate stability against the euro is statistically insignificant. Countries’ invoicing currency choices are not just impacted by their own trade patterns and exchange rate volatilities but also by those of their trade partners and competitors. These effects operate mainly via bilateral trade linkages rather than strategic complementarities in export price setting, which underscores the relevance of changes to input-output linkages as determinants of invoicing currency patterns.
These findings have implications for policy. They suggest that, in response to the pandemic shock and the war in Ukraine, reshoring or friendshoring of production chains could lead to stronger regional trade, notably on the European continent. That in turn could strengthen the future role of the euro for the invoicing of international trade.
More
C Determinants of currency choice in cross-border bank loans
By Lorenz Emter, Peter McQuade, Swapan Kumar Pradhan (BIS)[28] and Martin Schmitz
Dominant currencies confer important economic, financial and strategic advantages on the issuer, so it is important to understand why some currencies have a more prominent international role than others. This special feature provides insights into various potential determinants of currency choice in cross-border bank lending, such as bilateral distance, measures of financial and trade linkages to issuer countries of major currencies, and invoicing currency patterns. Cross-border bank lending in US dollars, and particularly in euro, is highly concentrated in a small number of countries. The United Kingdom is central in the international network of loans denominated in euro, although there are tentative signs that this role has diminished for lending to non-banks since Brexit, with such loans now possibly booked by newly-established US (or euro area) subsidiaries. Offshore financial centres are pivotal for US dollar loans, reflecting, in particular, lending to non-bank financial intermediaries in the Cayman Islands, possibly as a result of regulatory and tax optimisation strategies of large multinationals and high net worth individuals. An empirical analysis suggests that euro-denominated loans face the “tyranny of distance”, in line with predictions of standard models of trade, as captured by a variety of variables, in contrast to US dollar loans. Complementarities between trade invoicing and bank lending are found for both the euro and the US dollar. Overall, the analysis suggests that the euro tends to be more of a regional currency, while use of the US dollar in cross-border bank lending is global.
More
4 Statistical annex
See more.
© European Central Bank, 2023
Postal address 60640 Frankfurt am Main, Germany
Telephone +49 69 1344 0
Website www.ecb.europa.eu
All rights reserved. Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged.
For specific terminology please refer to the ECB glossary (available in English only).
The cut-off date for the statistics included in this report was 30 April 2023.
PDF ISBN 978-92-899-5527-0, ISSN 1725-6593, doi:10.2866/518597, QB-XN-23-001-EN-N
HTML ISBN 978-92-899-5552-2, ISSN 1725-6593, doi:10.2866/063496, QB-XN-23-001-EN-Q
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Kremlin Unfazed as Ruble Crashes Through 100 vs. Dollar
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2023-08-14T00:00:00
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The Russian ruble’s slide past 100 against the dollar has exposed a multi-billion dollar dilemma at the heart of the Russian economy: how can the Kremlin carry on funding its war against Ukraine without triggering a surge in inflation and fresh fears of an economic crisis at home?
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The Moscow Times
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https://www.themoscowtimes.com/2023/08/14/kremlin-unfazed-as-ruble-crashes-through-100-vs-dollar-a82145
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The Russian ruble’s slide past 100 against the dollar has exposed a multi-billion dollar dilemma at the heart of the Russian economy: how can the Kremlin carry on funding its war against Ukraine without triggering a surge in inflation and fresh fears of an economic crisis at home?
The ruble dipped below the crucial level on Monday for the first time since March 2022, when the Russian economy appeared to be on the brink of collapse amid Moscow’s invasion of Ukraine and a cascade of Western sanctions.
Last year, sweeping capital controls, an emergency interest rate hike and a rapid surge in the production of guns, missiles, tanks and artillery shells to be used against Ukraine saved the ruble and helped Russia’s economy defy predictions of a double-digit hit to GDP.
But with the war having raged for 18 months and more Western sanctions now in place — such as an oil price cap and drastic cuts in European purchases of Russian gas — the ruble’s decline underscores the challenges Moscow will face in an attempt to repeat last year’s fire-fighting efforts.
The ruble has lost half its value since a peak in June 2022, a devaluation that has raised the specter of a familiar foe — inflation.
Prices are once again rising faster than the government’s official 4% target. Food prices, which usually fall in the summer months, are steadily increasing and the central bank’s forecast — penned before the latest currency slide — foresees inflation accelerating toward 6.5% by the end of this year.
“The collapse of the ruble has already triggered an inflationary spiral. It can only be stopped by bringing the rate back under 90,” said Yevgeny Suvorov, an economist at Moscow-based CentroCredit Bank.
For Russians who have grown accustomed to economic crises in the three decades since the fall of the Soviet Union, the ruble exchange rate has powerful symbolic importance as a marker of the economy’s overall health. Economists say the fall into triple-digit territory — a vital psychological threshold — could further push Russians to move their assets out of the country, or at least, into other currencies.
“It’s obvious that the ongoing weakening of the ruble will not only stoke inflation even more, but will undermine trust in the currency itself and the economy in general,” Yevgeny Kogan, an economics professor at Moscow’s Higher School of Economics (HSE), wrote in a post on his Telegram channel.
Foreign cash holdings are up 23% this year among Russians while outflows to foreign banks have jumped 41%, he noted.
Kogan said a sustained breakthrough of 100 rubles against the dollar could lead to serious price hikes by companies that use imported goods or equipment, and it might trigger financial panic among the population.
Across Russian society, a feeling that the government cares little about the falling ruble is spreading, with talk of how the Kremlin benefits from a falling currency cropping up across Russian social media.
A weaker currency means Russia’s energy exports, dictated by global dollar-based oil prices, will funnel more rubles into the government’s coffers.
The amount of rubles earned for every barrel of Russia’s Urals blend of crude oil has more than doubled this year — from 3,320 on Jan. 1 to 7,300, according to market data.
Overall, every 10-point slide in the value of the ruble against the dollar — from 90 to 100, for instance — brings in an extra 1 trillion rubles ($10 billion) for the Russian state, Renaissance Capital’s Sofya Donets calculates. The same fall adds 0.5-1 percentage point to inflation, Kogan estimates.
Those extra funds are sorely needed by Moscow, which has chalked up a 2.8-trillion ruble ($28 billion) budget deficit so far this year.
A weaker ruble means Russia can buy more arms, ammunition and pay higher salaries for soldiers, making devaluation an attractive short-term solution to the Kremlin’s budget woes and its top priority — funding the invasion of Ukraine. Battling inflation and dealing with the other domestic costs of a weak currency, can come later.
“It’s more important to get through the next few months, or until spring, and in the long run, if things turn out worse because of this, then it doesn't really matter. It matters, but what matters much more is the ability to be able to wage war and pay bills in the next 4-6 months,” Iikka Korhonen, head of the Bank of Finland Institute for Emerging Economies (BOFIT), said of the Kremlin’s logic.
With spending on the war the Kremlin’s overriding priority, analysts are poised for potentially drastic action from the Central Bank, whose main task since the invasion has been to mitigate the domestic economic impacts of Russia’s war.
Responding to the currency's slide, the Central Bank on Monday afternoon said its board of directors would hold an emergency meeting on Tuesday — its first extraordinary session since Feb. 28, 2022 — where it is set to raise interest rates from their current level of 8.5%.
The ruble temporarily strengthened above 100 on the news.
Last week, Russia's Central Bank suspended foreign currency purchases until at least the end of the year under its so-called “budget rule,” which would typically funnel excess profits from oil and gas sales into foreign currency holdings. But that measure had little effect in halting the ruble's descent. Yet more serious moves are not being ruled out.
“Monetary policy is by no means the only tool in the financial authorities’ arsenal,” said Alexander Bakhtin, an investment strategist at Moscow-based BCS brokerage.
“A return to mandatory regulations on the sale of foreign currency earnings and strengthening of currency controls is possible.”
But it remains far from clear that new capital controls would have the same effect in stopping the slide as it did 18 months ago. The shrinking of Russia’s current account surplus — down from $165 billion in the first seven months of 2022 to $25.2 this year — has significantly changed the ruble’s basic supply-and-demand dynamics.
The Central Bank has repeatedly indicated the strictest kinds of capital controls, like forced conversions of foreign currency earnings, should only be temporary measures and reserved for major financial crises. But with the Kremlin’s dead set on marshaling resources for its war, other options may be limited.
“Previously, the Central Bank was always very reluctant to take those kinds of actions,” said BOFIT’s Korhonen. “Now with the war, the cost-benefit analysis has changed, so those measures are always there. But the thing with capital controls is, the longer they are in place, the harder the costs will be.”
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https://en.wikipedia.org/wiki/Russian_ruble
|
Currency of Russia
This article is about the currency of the modern Russian Federation. For the currencies of the Russian Empire and the Soviet Union, see Ruble.
RubleРоссийский рубль (Russian)[a]
руб, Rub
ISO 4217CodeRUB (numeric: 643)Subunit 0.01UnitUnitrublePluralThe language(s) of this currency belong(s) to the Slavic languages. There is more than one way to construct plural forms.Symbol₽DenominationsSubunit 1⁄100kopeyka (копейка)[b]Symbol kopeyka (копейка)[b]коп. or к (Cyrillic)
kop or k (Latin)Banknotes Freq. used5 ₽, 10 ₽, 50 ₽, 100 ₽, 200 ₽, 500 ₽, 1,000 ₽, 2,000 ₽, 5,000 ₽Coins Freq. used1 ₽, 2 ₽, 5 ₽, 10 ₽ Rarely used1 kop, 5 kop, 10 kop, 50 kop, 25 ₽DemographicsDate of introduction14 July 1992:
RUR (1 SUR = 1 RUR)
1 January 1998:
RUB (1,000 RUR = 1 RUB)ReplacedSoviet ruble (SUR)Official user(s)RussiaUnofficial user(s)Abkhazia, South OssetiaIssuanceCentral bankBank of Russia Websitewww .cbr .ruPrinterGoznak Websitewww .goznak .ruMintMoscow Mint and Saint Petersburg MintValuationInflation7.4% (December 2023) SourceBank of Russia MethodCPI
The ruble or rouble[c] (Russian: рубль, romanized: rublʹ; symbol: ₽; abbreviation: руб or р. in Cyrillic, Rub in Latin;[1] ISO code: RUB) is the currency of the Russian Federation. The ruble is subdivided into 100 kopecks (sometimes written as copeck or kopek; Russian: копе́йка, romanized: kopeyka, pl. копе́йки, kopeyki). It is used in Russia as well as in the parts of Ukraine under Russian military occupation and in Russian-occupied parts of Georgia.
The ruble was the currency of the Russian Empire and of the Soviet Union (as the Soviet ruble). In 1992, the currency imagery underwent a redesign as a result of the fall of the Soviet Union. The first Russian ruble (code: RUR) replaced the Soviet ruble (code: SUR) in September 1993 at par.
On 1 January 1998, preceding the Russian financial crisis, the ruble was redenominated with the new code "RUB" and was exchanged at the rate of 1 RUB = 1,000 RUR.
History
[edit]
Main article: Ruble
The ruble has been used in the Russian territories since the 14th century,[2] and is the second-oldest currency still in circulation, behind sterling.[3] Initially an uncoined unit of account, the ruble became a circulating coin in 1704 just before the establishment of the Russian Empire. It was also the first currency in Europe to be decimalised in 1704, when it was divided into 100 kopecks. The ruble has seen several incarnations and redenominations during its history, the latest of which is the introduction in 1998 of the current Russian ruble (code: RUB) at the rate of 1 RUB = 1,000 RUR.
RUR (1992–1998)
[edit]
Following the dissolution of the Soviet Union in 1991, the Soviet ruble remained the currency of the Russian Federation until 1992. A new set of coins was issued in 1992 and a new set of banknotes was issued in the name of Bank of Russia in 1993. The currency replaced the Soviet ruble at par and was assigned the ISO 4217 code RUR and number 810.
The ruble's exchange rate versus the U.S. dollar depreciated significantly from US$1 = 125 RUR in July 1992 to approximately US$1 = 6,000 RUR when the currency was redenominated in 1998.
RUR coins
[edit]
After the fall of the Soviet Union, the Russian Federation introduced new coins in 1992 in denominations of 1, 5, 10, 20, 50, and 100 rubles. The coins depict the double-headed eagle without a crown, sceptre and globus cruciger above the legend "Банк России" ("Bank of Russia"). It is exactly the same eagle that the artist Ivan Bilibin painted after the February Revolution as the coat of arms for the Russian Republic.[4] The 1 and 5-ruble coins were minted in brass-clad steel, the 10 and 20-ruble coins in cupro-nickel, and the 50 and 100-ruble coins were bimetallic (aluminium-bronze and cupro-nickel-zinc). In 1993, aluminium-bronze 50-ruble coins and cupro-nickel-zinc 100-ruble coins were issued, and the material of 10 and 20-ruble coins was changed to nickel-plated steel. In 1995 the material of 50-ruble coins was changed to brass-plated steel, but the coins were minted with the old date 1993. As high inflation persisted, the lowest denominations disappeared from circulation and the other denominations became rarely used.
During this period, the commemorative one-ruble coins were regularly issued continuing the specifications of prior commemorative Soviet rubles (31 mm diameter, 12.8 grams cupronickel). It is nearly identical to those of the 5-Swiss franc coin (31.45 mm, 13.2 g cupronickel), worth approx. €4.39 or US$5.09 as of August 2018. For this reason, there have been several instances of (now worthless) Soviet and Russian ruble coins being used on a large scale to defraud automated vending machines in Switzerland.[5]
RUR banknotes
[edit]
In 1961, new State Treasury notes were introduced for 1, 3 and 5 rubles, along with new State Bank notes worth 10, 25, 50, and 100 rubles. In 1991, the State Bank took over production of 1, 3 and 5-ruble notes and also introduced 200, 500 and 1,000-ruble notes, although the 25-ruble note was no longer issued. In 1992, a final issue of notes was made bearing the name of the USSR before the Russian Federation introduced 5,000 and 10,000-ruble notes. These were followed by 50,000-ruble notes in 1993, 100,000 rubles in 1995 and, finally, 500,000 rubles in 1997 (dated 1995).
Since the dissolution of the Soviet Union in 1991, Russian ruble banknotes and coins have been notable for their lack of portraits, which traditionally were included under both the Tsarist and Communist regimes. With the issue of the 500-ruble note depicting a statue of Peter I and then the 1,000-ruble note depicting a statue of Yaroslav, the lack of recognizable faces on the currency has been partially alleviated.
SUR and RUR series banknotes Series Value Obverse Reverse Issuer Languages 1961 1, 3, 5, 10, 25, 50, 100 rubles Vladimir Lenin or views of the Moscow Kremlin Value, and views of the Moscow Kremlin for 50 rubles or higher USSR multiple 1991 1, 3, 5, 10, 50, 100, 200, 500, 1,000 rubles Russian 1992 50, 200, 500, 1,000, 5,000, 10,000 rubles
USSR for 1,000 rubles and lower
Bank of Russia for 5,000- and 10,000 rubles
Russian 1993 100, 200, 500, 1,000, 5,000, 10,000, 50,000 rubles Moscow Kremlin with the tri-color Russian flag Bank of Russia 1995 1,000, 5,000, 10,000, 50,000, 100,000, 500,000 rubles Same design as today's banknotes, where 1 RUB = 1,000 RUR. The 1,000 ruble note did not continue as a 1 new ruble note.
RUB (1998–present)
[edit]
In 1998, the Russian ruble was redenominated with the new ISO 4217 code "RUB" and number 643 and was exchanged at the rate of 1 RUB = 1,000 RUR. All Soviet coins issued between 1961 and 1991, as well as 1-, 2- and 3-kopeck coins issued before 1961, also qualified for exchange into new rubles.[6]
The redenomination was an administrative step that reduced the unwieldiness of the old ruble[7] but occurred on the brink of the 1998 Russian financial crisis.[8] The ruble lost 70% of its value against the US dollar in the six months following this financial crisis, from US$1 = 6 ₽ to approximately 20 ₽.[9]
After stabilizing at around US$1 = 30 ₽ from 2001 to 2013, it depreciated to the range of US$1 = 60-80 ₽ from 2014 to 2021 as a result of the Annexation of Crimea by the Russian Federation in 2014 and the 2010s oil glut. After the 2022 Russian invasion of Ukraine, it declined further to US$1 = 110 ₽ due to sanctions.[10]
The ruble was subject to fluctuation when, in April 2022, the ruble went above its pre-war level after falling as low as 150 ₽ per dollar in early March,[11] with the longer-term trend showing a steady decline from mid-2022 to mid-2023, falling from 60 ₽ to 90 ₽ per dollar.[12]
On 15 July 2024 the Central Bank of the Russian Federation closed the statistics of the over-the-counter currency market,[13] and three days later the sale of ruble-note artwork on toilet paper was banned by a judge from Moscow.[14]
Symbol
[edit]
Main article: Ruble sign
Not to be confused with the Armenian letter ք.
A currency symbol was used for the ruble between the 16th century and the 18th century. The symbol consisted of the Russian letters "Р" (rotated 90° anti-clockwise) and "У" (written on top of it). The symbol was placed over the amount number it belonged to.[15] This symbol, however, fell into disuse by the mid-19th century.[16]
No official symbol was used during the final years of the Empire, nor was one introduced in the Soviet Union. The abbreviations Rbl (plural: Rbls) in Latin[17][18] and руб. (Cyrillic) and the simple characters R (Latin)[19][20][21] and р (Cyrillic) were used. These are still used today, though are unofficial.[22]
In July 2007, the Central Bank of Russia announced that it would decide on a symbol for the ruble and would test 13 symbols. This included the symbol РР (the initials of Российский Рубль "Russian ruble"), which received preliminary approval from the Central Bank.[23] However, one more symbol, a Р with a horizontal stroke below the top similar to the Philippine peso sign, was proposed unofficially.[23] Proponents of the new sign claimed that it is simple, recognizable and similar to other currency signs.[24][25][26] This symbol is also similar to the Armenian letter ք or the Latin letter Ꝑ.
On 11 December 2013, the official symbol for the ruble became , a Cyrillic letter Er with a single added horizontal stroke,[27][better source needed] though the abbreviation "руб." is in wide use.
On 4 February 2014, the Unicode Technical Committee during its 138th meeting in San Jose accepted U+20BD ₽ RUBLE SIGN symbol for Unicode version 7.0;[28] the symbol was then included into Unicode 7.0 released on 16 June 2014.[29] In August 2014, Microsoft issued updates for all of its mainstream versions of Microsoft Windows that enabled support for the new ruble sign.[30]
The ruble sign can be entered on a Russian computer keyboard as AltGr+8 on Windows and Linux, or AltGr+Р (Qwerty H position) on macOS.
Coins
[edit]
In 1998, the following coins were introduced in connection with the ruble revaluation and are currently in circulation:
Currently circulating coins[31] Image Value Technical parameters Description Years of minting Reverse Obverse Diameter Mass Composition Edge Obverse Reverse 1 kop 15.5 mm 1.5 g[32] Cupronickel-steel Plain Saint George Value
1997–2009
2014, 2017
5 kop 18.5 mm 2.6 g[32] 10 kop 17.5 mm 1.95 g[32] Brass Reeded Saint George Value 1997–2006 1.85 g Brass-plated steel Plain 2006–2015 50 kop 19.5 mm 2.90 g[32] Brass Reeded 1997–1999
2002–2006 2.75 g Brass-plated steel Plain 2006–2015 1 ₽ 20.5 mm 3.25 g Cupronickel Reeded Emblem of the Bank of Russia Value
1997–1999
2005–2009
3.00 g Nickel-plated steel 2009–2015 Coat of arms of Russia 2016–present 2 ₽ 23 mm 5.10 g Cupronickel Segmented (Plain and Reeded edges) Emblem of the Bank of Russia
1997–1999
2006–2009
5.00 g Nickel-plated steel 2009–2015 Coat of arms of Russia 2016–present 5 ₽ 25 mm 6.45 g Cupronickel-clad copper Emblem of the Bank of Russia
1997–1998
2008–2009
6.00 g Nickel-plated steel 2009–2015 Coat of arms of Russia 2016–present 10 ₽ 22 mm 5.63 g Brass-plated steel Segmented (plain and reeded edges) Emblem of the Bank of Russia Value 2009–2013, 2015 Coat of arms of Russia 2016–present
Kopeck coins are rarely used due to their low value and in some cases may not be accepted by stores or individuals.
These coins were issued starting in 1998, although some of them bear the year 1997. Kopeck denominations all depict St George and the Dragon, and all ruble denominations (with the exception of commemorative pieces) depict the double headed eagle. Mint marks are denoted by "СП" or "M" on kopecks and the logo of either the Saint Petersburg or Moscow mint on rubles. Since 2000, many bimetallic 10 ₽ circulating commemorative coins have been issued. These coins have a unique holographic security feature inside the "0" of the denomination 10.[citation needed]
In 2008, the Bank of Russia proposed withdrawing 1 and 5 kopeck coins from circulation and subsequently rounding all prices to multiples of 10 kopeks, although the proposal has not been realized yet (though characteristic "x.99" prices are treated as rounded in exchange).[citation needed] The Bank of Russia stopped minting one-kopeck and five-kopeck coins in 2012, and kopecks completely in 2018.[33]
The material of 1 ₽, 2 ₽ and 5 ₽ coins was switched from copper-nickel-zinc and copper-nickel clad to nickel-plated steel in the second quarter of 2009. 10 and 50 kopecks were also changed from brass to brass-plated steel.[citation needed]
In October 2009, a new 10 ₽ coin made of brass-plated steel was issued, featuring optical security features.[34] The 10 ₽ banknote would have been withdrawn in 2012, but a shortage of 10 ₽ coins prompted the Central Bank to delay this and put new ones in circulation.[35] Bimetallic commemorative 10-ruble coins will continue to be issued.[citation needed]
A series of circulating Olympic commemorative 25 ₽ coins started in 2011. The new coins are struck in cupronickel.[36] A number of commemorative smaller denominations of these coins exist in circulation as well, depicting national historic events and anniversaries.
The Bank of Russia issues other commemorative non-circulating coins ranging from 1 ₽ to 50,000 ₽.[37]
Banknotes
[edit]
On 1 January 1998, a new series of banknotes dated 1997 was released in denominations of 5 ₽, 10 ₽, 50 ₽, 100 ₽ and 500 ₽. The 1,000 ₽ banknote was first issued on 1 January 2001 and the 5,000 ₽ banknote was first issued on 31 July 2006. Modifications to the series were made in 2001, 2004, and 2010.
In April 2016, the Central Bank of Russia announced that it will introduce two new banknotes – 200 ₽ and 2,000 ₽ — in 2017.[38] In September 2016, a vote was held to decide which symbols and cities will be displayed on the new notes.[39] In February 2017, the Central Bank of Russia announced the new symbols. The 200 ₽ banknote will feature symbols of Crimea: the Monument to the Sunken Ships, a view of Sevastopol, and a view of Chersonesus. The 2,000 ₽ banknote will bear images of the Russian Far East: the bridge to Russky Island and the Vostochny Cosmodrome in the Amur Oblast.[40]
In 2018, the Central Bank issued a 100 ₽ "commemorative" banknote designed to recognize Russia's role as the host of the 2018 World Cup soccer tournament. The banknote is printed on a polymer substrate, and has several transparent portions as well as a hologram. Despite the note being intended for legal tender transactions, the Central Bank has simultaneously refused to allow the country's automated teller machines (ATMs) to recognize or accept it.[41]
In March 2021, the Central Bank announced plans to gradually update the designs of the 10 ₽, 50 ₽, 100 ₽, 1,000 ₽ and 5,000 ₽ banknotes and make them more secure; this is expected to be completed in 2025.[42]
The first new design, for the 100 ₽ note, was unveiled on 30 June 2022.[43] The design of the new note includes symbols of Moscow on the obverse - Red Square, Zaryadye Park, Moscow State University on Sparrow Hills, and Ostankino Tower - and the Rzhev Memorial to the Soviet Soldier on the reverse.[44]
In late 2022, the Central Bank resumed the printing of 5-ruble and 10-ruble notes for circulation; freshly printed notes began appearing in 2023.[45]
1997 series[46] Image Value Dimensions Description Dates Obverse Reverse Town Obverse Reverse Watermark Printing* Issue Withdrawal Lapse 5 ₽ 137 × 61 mm Veliky Novgorod The Millennium of Russia monument on background of Saint Sophia Cathedral Fortress wall of the Novgorod Kremlin "5", Saint Sophia Cathedral 1997
2022
1 January 1998 Current, but not issued from 2001 until 2021.
Re-issued in 2022. Rarely seen in circulation. Returned to circulation in 2023.[45]
10 ₽ 150 × 65 mm Krasnoyarsk Kommunalny Bridge across the Yenisei River, Paraskeva Pyatnitsa Chapel Krasnoyarsk hydroelectric plant "10", Paraskeva Pyatnitsa Chapel
1997
2001
2004
2022
Current, but not issued from 2010 to 2021.
Re-issued in 2022. Still in use, but rarely seen in circulation. Returned to circulation in 2023.[45]
50 ₽ Saint Petersburg A Rostral Column sculpture on background of Peter and Paul Fortress Old Saint Petersburg Stock Exchange and Rostral Columns "50", Peter and Paul Cathedral Current 100 ₽ Moscow Quadriga statue on the portico of the Bolshoi Theatre The Bolshoi Theatre "100", The Bolshoi Theatre 500 ₽ Arkhangelsk Monument to Czar Peter the Great, sailing ship and sea terminal[47] Solovetsky Monastery "500", portrait of Peter the Great
1997
2001
2004
2010
1,000 ₽ 157 × 69 mm Yaroslavl Monument to Yaroslav I the Wise and the Lady of Kazan Chapel John the Baptist Church "1,000", portrait of Yaroslav the Wise
2001
2004
2010
1 January 2001 5,000 ₽ Khabarovsk Monument to Nikolay Muravyov-Amursky Khabarovsk Bridge over the Amur "5,000", portrait of Muravyov-Amursky
2006
2010
31 July 2006 These images are to scale at 0.7 pixel per millimetre. For table standards, see the banknote specification table.
Each new banknote series has enhanced security features, but no major design changes. Banknotes printed after 1997 bear the fine print "модификация 2001г." (or later date) meaning "modification of year 2001" on the left watermark area.
2017–2025 series[46] Image Value Dimensions Description Date of Obverse Reverse Federal District Obverse Reverse Watermark printing issue withdrawal lapse 100 ₽ 150 × 65 mm Central Federal District Moscow: Spasskaya Tower, Zaryadye Park, Moscow State University, Ostankino Tower Memorial to the Soviet Soldier, Rzhev, Tver Oblast; Kulikovo Field, Tula Oblast "100", Spasskaya Tower 2022 30 June 2022 Current 200 ₽ 150 × 65 mm Southern Federal District Monument to the Sunken Ships (by sculptor Amandus Adamson), Sevastopol View of Chersonesus "200", Monument to the Sunken Ships 2017 12 October 2017 1,000 ₽ 157 × 69 mm Volga Federal District Nizhny Novgorod: Nikolskaya Tower of the Nizhny Novgorod Kremlin, Nizhny Novgorod Fair, Spit of Nizhny Novgorod, Nizhny Novgorod Stadium Museum of the History of Statehood of the Tatar People and the Republic of Tatarstan in Kazan, Söyembikä Tower on the Kazan Kremlin, Museum of Archeology and Ethnography in Ufa "1000", Nikolskaya Tower of the Nizhny Novgorod Kremlin 2023 16 October 2023 2,000 ₽ 157 × 69 mm Far Eastern Federal District Vladivostok: Russky Bridge, Far Eastern Federal University Vostochny Cosmodrome, Tsiolkovsky, Amur Oblast "2000", Russky Bridge 2017 12 October 2017 5,000 ₽ 157 × 69 mm Ural Federal District Yekaterinburg: Stele "Europe - Asia", Iset Tower in Yekaterinburg-City, Vysotsky, Yekaterinburg Circus, House of Communications (main post office building), Palace of Sporting Games, Sevastyanov's House Monument "Tale of the Urals" in Chelyabinsk, metallurgical plant, stele "66 parallel" (Arctic Circle) in Salekhard, oil and gas industry facilities "5000", House of Communications (main post office building), Sevastyanov's House 2023 16 October 2023
For the rest of the 2017–2025 series, the following designs are planned:[48]
10 ₽ (2025): Novosibirsk on the obverse, Siberian Federal District on the reverse
50 ₽ (2025): Saint Petersburg on the obverse, Northwestern Federal District on the reverse
500 ₽ (2024): Pyatigorsk on the obverse, North Caucasian Federal District on the reverse.
Printing
[edit]
All Russian ruble banknotes are currently printed at the state-owned factory Goznak in Moscow, which was founded on 6 June 1919 and operated ever since. Coins are minted in the Moscow Mint and at the Saint Petersburg Mint, which has been operating since 1724.
100 ₽ note controversy
[edit]
On 8 July 2014, State Duma deputy and vice-chairman of the Duma Regional Political Committee Roman Khudyakov alleged that the image of the Greek god Apollo driving a Quadriga on the portico of the Bolshoi Theatre in Moscow on the 100 ₽ banknote constitutes pornography that should only be available to persons over the age of 18. Since it is impractical to limit the access of minors to banknotes, he requested in his letter to the Governor of the Bank of Russia Elvira Nabiullina to immediately change the design of the banknote.[49]
Khudyakov, a member of parliament for the LDPR party stated, "You can clearly see that Apollo is naked, you can see his genitalia. I submitted a parliamentary request and forwarded it directly to the head of the central bank asking for the banknote to be brought into line with the law protecting children and to remove this Apollo."[50][51] Khudyakov's efforts did not lead to any changes being made to the design.
Crimea controversy
[edit]
On 13 October 2017, the National Bank of Ukraine issued a decree forbidding the country's banks, other financial institutions and Ukraine's state postal service to circulate Russian banknotes which use images of Crimea, a territory that is regarded as Russian-occupied by Ukraine and whose annexation by Russia is not recognised by most UN member states.[52] The NBU stated that the ban applies to all financial operations, including cash transactions, currency exchange activities and interbank trade.[53] Crimea is featured on three banknotes that are currently in circulation – the 100 ₽ commemorative notes issued in 2015 and 2018, as well as the 200 ₽ note issued in 2017.
1,000 ₽ note controversy
[edit]
On 16 October 2023, the day of unveilling of the new design of the 1,000-ruble note, the design of the note was criticised by the Russian Orthodox Church for displaying the Islamic crescent on one of the buildings on the reverse of the note at the same time as excluding the Orthodox cross from a different building (a former church that is now a museum).[54] The Bank of Russia claimed that the image was not selected to provoke or disregard any faith, but announced on the following day that the design would be revised and the notes would not be printed.[citation needed]
Effect of international sanctions
[edit]
Kommersant reported that the new 100 ₽ note introduced in 2022 will not work with an estimated 60% of cash registers and bank machines because they are imported and therefore must be updated by foreign companies, and this work may not be completed due to sanctions.[55][56] However, Russian banks have been transferring their ATM networks to domestic software which does not require foreign specialists since at least 2018, with the biggest Russian bank, Sberbank, completing 80% of the transfer by June 2022.[57] Russian banks will start purchasing domestic ATMs with Elbrus processors in 2023, the mandatory share of Russian products in the purchase of ATMs was to be at least 18% for banks with state partnership, since 2022 it has grown to 20%.[58]
Commemorative banknotes
[edit]
Commemorative banknote series[59] Image Value Dimensions Description Dates Obverse Reverse Obverse Reverse Watermark Printing* Issue Withdrawal Lapse 100 ₽ 150 × 65 mm A snowboarder and some of the Olympic venues of the Sochi coastal cluster. Fisht Olympic Stadium in Sochi, firebird 2014 Winter Olympics logo 2014 30 October 2013 Current 100 ₽ 150 × 65 mm Monument to the Sunken Ships in Sevastopol Bay, outlines of Monument to the heroes of the Second Siege of Sevastopol and St. Vladimir Cathedral, fragment of a painting by Ivan Aivazovsky Swallow's Nest castle, Yevpatoria RT-70 radio telescope, outline of Big Khan Mosque in Bakhchisaray and a green stripe containing a QR code linking to the Bank of Russia webpage containing historical information relating to the commemorative banknote Portrait of Empress Catherine the Great 2015 23 December 2015 100 ₽ 150 × 65 mm A boy with a ball under his arm looking up as Lev Yashin saves a ball. A stylized image of the globe in the form of a football with a green image of Russia's territory (including Crimea) outlined on it, as well as the name of the 2018 FIFA World Cup host cities The number 2018 2018 22 May 2018
On 30 October 2013, a special banknote in honour of the 2014 Winter Olympics held in Sochi was issued. The banknote is printed on high-quality white cotton paper. A transparent polymer security stripe is embedded into the paper to make a transparent window incorporating an optically variable element in the form of a snowflake. The highlight watermark is visible in the upper part of the banknote. Ornamental designs run vertically along the banknote. The front of the note features a snowboarder and some of the Olympic venues of the Sochi coastal cluster. The back of the note features the Fisht Olympic Stadium in Sochi. The predominant colour of the note is blue.
On 23 December 2015, another commemorative 100 ₽ banknote was issued to celebrate the "reunification of Crimea and Russia". The banknote is printed on light-yellow-coloured cotton paper. One side of the note is devoted to Sevastopol, the other one — to Crimea. А wide security thread is embedded into the paper. It comes out on the surface on the Sevastopol side of the banknote in the figure-shaped window. A multitone combined watermark is located on the unprinted area in the upper part of the banknote. Ornamental designs run vertically along the banknote. The Sevastopol side of the note features the Monument to Sunken Ships in Sevastopol Bay and a fragment of the painting "Russian Squadron on the Roads of Sevastopol" by Ivan Aivazovsky. The Crimea side of the note features the Swallow's Nest, a decorative castle and local landmark. In the lower part of the Sevastopol side of the banknote in the green stripe there is a QR-code containing a link to the Bank of Russia's webpage, which lists historical information related to the banknote. The predominant colour of the note is olive green.
On 22 May 2018, a special banknote to celebrate the 2018 FIFA World Cup was issued.[60] The banknote is printed on polymer. The top part of the note bears a transparent window that contains a holographic element. The design of the note is vertically oriented. The main images of the obverse are a boy with a ball under his arm and a goalkeeper diving for a ball. The main image of the reverse is a stylized image of the globe in the form of a football with green image of the Russian territory outlined on it. On the reverse there is the number 2018 that marks both the issue of the banknote and the World Cup, as well as the name of the host cities in the Russian language. The bottom right corner of the obverse bears a QR-code, which contains a link to the page of the Bank of Russia website with the description of the note's security features. Predominant colours of the note are blue and green.
Economics
[edit]
The use of other currencies for transactions between Russian residents is punishable, with a few exceptions, with a fine of 75% to 100% of the value of the transaction.[61]
International trade
[edit]
On 23 November 2010, at a meeting of Russian Prime Minister Vladimir Putin and Chinese Premier Wen Jiabao, it was announced that Russia and China had decided to use their own national currencies for bilateral trade, instead of the US dollar. The move is aimed to further improve relations between Beijing and Moscow and to protect their domestic economies during the Great Recession. The trading of the Chinese yuan against the ruble has started in the Chinese interbank market, while the yuan's trading against the ruble was set to start on the Russian foreign exchange market in December 2010.[62][better source needed]
In January 2014, President Putin said there should be a sound balance on the ruble exchange rate; that the Central Bank only regulated the national currency exchange rate when it went beyond the upper or lower limits of the floating exchange rate; and that the freer the Russian national currency is, the better it is, adding that this would make the economy react more effectively and timely to processes taking place in it.[63]
Exchange rates
[edit]
Current RUB exchange rates From Google Finance: AUD CAD CHF CNY EUR GBP HKD JPY USD From Yahoo! Finance: AUD CAD CHF CNY EUR GBP HKD JPY USD From XE.com: AUD CAD CHF CNY EUR GBP HKD JPY USD From OANDA: AUD CAD CHF CNY EUR GBP HKD JPY USD
The first Russian ruble (RUR) introduced in January 1992 depreciated significantly versus the US dollar from US$1 = 125 RUR to around US$1 = 6,000 RUR (or 6 RUB) when it was redenominated in January 1998. The new ruble then depreciated rapidly in its first year to US$1 = 20 RUB before stabilizing at around US$1 = 30 RUB from 2001 to 2013.
The financial crisis in Russia in 2014–2016 was the result of the collapse of the Russian ruble beginning in the second half of 2014.[64][65][66][67][68][69] A decline in confidence in the Russian economy caused investors to sell off their Russian assets, which led to a decline in the value of the Russian ruble and sparked fears of a Russian financial crisis. The lack of confidence in the Russian economy stemmed from at least two major sources. The first is the fall in the price of oil in 2014. Crude oil, a major export of Russia, declined in price by nearly 50% between its yearly high in June 2014 and 16 December 2014. The second was the result of international economic sanctions imposed on Russia following Russia's annexation of Crimea and the Russian military intervention in Ukraine.[64][70]
The crisis affected the Russian economy, both consumers and companies, and regional financial markets, as well as Putin's ambitions regarding the Eurasian Economic Union. The Russian stock market in particular experienced large declines, with a 30% drop in the RTS Index from the beginning of December through 16 December 2014. From July 2014 to February 2015 the ruble fell dramatically against the U.S. dollar. A 6.5 percentage point interest rate rise to 17 percent[71] failed to prevent the currency hitting record lows in a "perfect storm" of low oil prices, looming recession and international sanctions over the Russo-Ukrainian War.[72]
Russia faced steep economic sanctions due to the invasion of Ukraine in early 2022. In response to the military campaign, several countries imposed strict economic sanctions on the Russian economy.[d] This led to a 32 percent drop in the value of the ruble, which traded at an exchange rate of 120 rubles per dollar in March 2022.[10] On 23 March 2022, President Putin announced that Russia would only accept payments for Russian gas exports from “unfriendly countries” in rubles.[73] This, along with several other actions to control capital flow, coinciding with soaring commodity prices led to the ruble rallying to a record high in May 2022 that economists feel is unlikely to last.[74] However, the ruble continued to rally in June 2022, hitting its highest point (51 rubles to the dollar) for the past seven years at the end of the month.[75]
RUB per US$1998–2023 Year Lowest ↓ Highest ↑ Average Date Rate Date Rate Rate 1998 1 January 5.9600 29 December 20.9900 9.7945 1999 1 January 20.6500 29 December 27.0000 24.6489 2000 6 January 26.9000 23 February 28.8700 28.1287 2001 4 January 28.1600 18 December 30.3000 29.1753 2002 1 January 30.1372 7 December 31.8600 31.3608 2003 20 December 29.2450 9 January 31.8846 30.6719 2004 30 December 27.7487 1 January 29.4545 28.8080 2005 18 March 27.4611 6 December 28.9978 28.1910 2006 6 December 26.1840 12 January 28.4834 27.1355 2007 24 November 24.2649 13 January 26.5770 25.5808 2008 16 July 23.1255 31 December 29.3804 24.8529 2009 13 November 28.6701 19 February 36.4267 31.7403 2010 16 April 28.9310 8 June 31.7798 30.3679 2011 6 May 27.2625 5 October 32.6799 29.3823 2012 28 March 28.9468 5 June 34.0395 31.0661 2013 5 February 29.9251 5 September 33.4656 31.9063 2014 1 January 32.6587 18 December 67.7851 38.6025 2015 17 April 49.6749 31 December 72.8827 61.3400 2016 30 December 60.2730 22 January 83.5913 66.8336 2017 26 April 55.8453 4 August 60.7503 58.2982 2018 28 February 55.6717 12 September 69.9744 62.9502 2019 26 December 61.7164 15 January 67.1920 64.6184 2020 10 January 61.0548 18 March 80.8692 72.4388 2021 27 October 69.5526 8 April 77.7730 73.6628 2022 30 June 51.1580 11 March 120.3785 68.4869 2023 15 January 66.0026 8 October 101.0001 85.5086 Source: USD exchange rates in RUB, Bank of Russia[76]
Most traded currencies by value
Currency distribution of global foreign exchange market turnover[77] Rank Currency ISO 4217
code Symbol or
abbreviation Proportion of daily volume Change
(2019–2022) April 2019 April 2022 1 U.S. dollar USD US$ 88.3% 88.5% 0.2pp 2 Euro EUR € 32.3% 30.5% 1.8pp 3 Japanese yen JPY ¥ / 円 16.8% 16.7% 0.1pp 4 Sterling GBP £ 12.8% 12.9% 0.1pp 5 Renminbi CNY ¥ / 元 4.3% 7.0% 2.7pp 6 Australian dollar AUD A$ 6.8% 6.4% 0.4pp 7 Canadian dollar CAD C$ 5.0% 6.2% 1.2pp 8 Swiss franc CHF CHF 4.9% 5.2% 0.3pp 9 Hong Kong dollar HKD HK$ 3.5% 2.6% 0.9pp 10 Singapore dollar SGD S$ 1.8% 2.4% 0.6pp 11 Swedish krona SEK kr 2.0% 2.2% 0.2pp 12 South Korean won KRW ₩ / 원 2.0% 1.9% 0.1pp 13 Norwegian krone NOK kr 1.8% 1.7% 0.1pp 14 New Zealand dollar NZD NZ$ 2.1% 1.7% 0.4pp 15 Indian rupee INR ₹ 1.7% 1.6% 0.1pp 16 Mexican peso MXN MX$ 1.7% 1.5% 0.2pp 17 New Taiwan dollar TWD NT$ 0.9% 1.1% 0.2pp 18 South African rand ZAR R 1.1% 1.0% 0.1pp 19 Brazilian real BRL R$ 1.1% 0.9% 0.2pp 20 Danish krone DKK kr 0.6% 0.7% 0.1pp 21 Polish złoty PLN zł 0.6% 0.7% 0.1pp 22 Thai baht THB ฿ 0.5% 0.4% 0.1pp 23 Israeli new shekel ILS ₪ 0.3% 0.4% 0.1pp 24 Indonesian rupiah IDR Rp 0.4% 0.4% 25 Czech koruna CZK Kč 0.4% 0.4% 26 UAE dirham AED د.إ 0.2% 0.4% 0.2pp 27 Turkish lira TRY ₺ 1.1% 0.4% 0.7pp 28 Hungarian forint HUF Ft 0.4% 0.3% 0.1pp 29 Chilean peso CLP CLP$ 0.3% 0.3% 30 Saudi riyal SAR ﷼ 0.2% 0.2% 31 Philippine peso PHP ₱ 0.3% 0.2% 0.1pp 32 Malaysian ringgit MYR RM 0.2% 0.2% 33 Colombian peso COP COL$ 0.2% 0.2% 34 Russian ruble RUB ₽ 1.1% 0.2% 0.9pp 35 Romanian leu RON L 0.1% 0.1% 36 Peruvian sol PEN S/ 0.1% 0.1% 37 Bahraini dinar BHD .د.ب 0.0% 0.0% 38 Bulgarian lev BGN BGN 0.0% 0.0% 39 Argentine peso ARS ARG$ 0.1% 0.0% 0.1pp … Other 1.8% 2.3% 0.5pp Total[e] 200.0% 200.0%
See also
[edit]
Belarusian ruble
Transnistrian ruble
Ruble (disambiguation), various historic and modern rubles.
Notes
[edit]
References
[edit]
Citations
[edit]
Sources
[edit]
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Amazon.com
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https://www.investopedia.com/terms/forex/r/rub-russian-ruble.asp
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Russian Ruble (RUB): Overview of Russia's Currency
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[
"Lucas Downey"
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2008-06-30T13:00:00-04:00
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The Russian ruble (RUB) is the currency of Russia and is the second-oldest currency still in circulation, behind the British pound sterling. The Russian ruble is made up of 100 kopeks.
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en
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/favicon.ico
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Investopedia
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https://www.investopedia.com/terms/forex/r/rub-russian-ruble.asp
|
What Is the Russian Ruble (RUB)?
The Russian ruble (sometimes spelled rouble) is the national currency of the Russian Federation. The ruble is the second-oldest currency still in circulation, behind the British pound. It is made up of 100 kopeks.
Understanding the Russian Ruble (RUB)
The ruble (RUB) has been used since the 13th century and has been through a number of incarnations during that time, including multiple revaluations and devaluations. The most recent changes occurred before the fall of the Soviet Union in 1992 and during the redenomination in 1998. The 1998 redenomination made one new ruble worth 1000 old rubles.
In recent years, the currency's exchange rate has generally tracked global commodity prices, especially oil prices, because Russia's economy heavily depends on exports of oil, natural gas, and other natural resources. The ruble collapsed in the second half of 2014, losing about half its value versus the U.S. dollar as global oil prices plunged. Economic and financial sanctions imposed by the U.S. and European Union on Russia in July 2014 over its invasion and annexation of Crimea also helped weaken it.
The Ruble and Geopolitics
The ruble’s exchange rate is not only affected by economic factors, but also by geopolitical events and tensions involving Russia and its neighbors. In recent years, the ruble has experienced significant volatility and depreciation due to several crises and conflicts that have strained Russia’s relations with the West and other countries.
One notable event was the annexation of Crimea by Russia in 2014, which triggered international sanctions and condemnation from the United States, the European Union, and other countries. The sanctions targeted key sectors of the Russian economy, such as energy, finance, defense, and trade, and restricted access to foreign capital and technology. The ruble plunged to record lows against the dollar and the euro in late 2014 and early 2015, as investors fled Russian assets amid uncertainty and risk. Prior to this event, the USD/RUB exchange rate was around 30 rubles to the dollar; following the invasion it rose to 50-60 rubles to dollars, where it remained for several years.
Following Russia’s large-scale invasion of Ukraine in February 2022, the U.S., the EU, and other nations imposed another round of even stricter sanctions on Russia’s largest financial institutions and enterprises, including Russia’s central bank and energy giant Gazprom. At the same time, many Western corporations suspended or ceased doing business inside of Russia. These measures sent the value of the ruble plummeting to record lows against foreign currency, and briefly touching nearly 135 rubles to the dollar.
As the Russia-Ukraine conflict has raged, the ruble settled into a trading range of around 70 to 80 RUB per USD; however, it remains volatile. For instance, in June of 2023, when the private military contractor Wagner Group mutinied and briefly marched toward Moscow, the ruble sank to 87 to the dollar — its weakest level since the early days of Russia's invasion of Ukraine — as it revealed internal political tensions and fragility for Putin's regime.
Russia's Economy
Russia is more than twice as large as the contiguous 48 U.S. states and is blessed with enormous natural resources. Yet Russia’s annual gross domestic product (GDP) ranked only 11th worldwide in 2021, is only 7.72% the size of the U.S. economy. That's because Russia relies heavily on exports of natural resources, rather than higher-value-added industries. In fact, in terms of GDP, Russia trails much smaller countries, such as Italy and France.
Ongoing political tensions have hurt the Russian economy, as the country has repeatedly faced sanctions from the international community. The value of the ruble along with many Russian companies plummeted after Russia began its invasion of Ukraine in February 2022.
The Digital Ruble
President Vladimir Putin announced in 2017 that the Bank of Russia would issue a Central Bank Digital Currency (CDBC). Though many countries are now exploring CBDCs, Russia was one of the earliest countries to do so. In December 2021, a prototype of the digital ruble was completed and the first transfers using the digital ruble's platform were successful. The Bank of Russia announced that 12 Russian banks were ready to begin using the digital ruble.
In February 2022, many commentators suggested Russia could evade international sanctions using cryptocurrency. Though a CBDC is much different from a private cryptocurrency, a digital ruble could limit Russia's dependence on using foreign currencies, such as the U.S. dollar.
The Bottom Line
The Russian Ruble (RUB), among the oldest currencies still in circulation, is heavily influenced by global oil prices, considering Russia's key role as an exporter of oil and natural gas. The Ruble has witnessed multiple transformations since its inception in the 13th century, with the latest changes occurring due to the fall of the Soviet Union in 1992 and the redenomination in 1998. Geopolitical events, particularly Russia's conflicts with Ukraine and the sanctions imposed from various nations, have played substantial roles in devaluing the Ruble's exchange rate. Despite the tumultuous economic climate, Russia has pioneered in the digital currency space with the introduction of a Central Bank Digital Currency. The Bank of Russia maintains control over the Ruble's value through various monetary policy tools.
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https://www.gmfus.org/news/russias-ruble-dips-new-lows-moscow-managing
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Russia’s Ruble Dips to New Lows, But Moscow is Managing
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The ruble plunged to new lows today, exceeding 80 to the U.S. dollar for the first time ever. The slump in oil prices – now at $28 per barrel compared with over $100 two years ago – has dragged Russia’s currency down with it. The ruble plunged to new lows today, exceeding 80 to the U.S. dollar for the first time ever. The slump in oil prices – now at $28 per barrel compared with over $100 two years ago – has dragged Russia’s currency down with it.
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/themes/gmfus/gmf-favicon.ico
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GMFUS
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https://www.gmfus.org/news/russias-ruble-dips-new-lows-moscow-managing
|
The ruble plunged to new lows today, exceeding 80 to the U.S. dollar for the first time ever. The slump in oil prices – now at $28 per barrel compared with over $100 two years ago – has dragged Russia’s currency down with it. Russia’s government depends on oil earnings for about half of its tax revenue, and commodities constitute the vast majority of the nation’s exports. So the commodity crash has created the most painful recession since the 2008 financial crisis, with Russia’s economy shrinking by about 3.8 percent in 2015. Is Russia now on the brink of financial collapse? And how will the economic crisis affect Russia’s foreign policy?
From the Russian government’s perspective, the depreciation of the ruble over the past week from 75 down toward 80 to the dollar is actually a positive move. The reason is that Moscow earns most of its revenues via taxes that are de-facto dollar denominated – above all, by taxing oil production and exports. But government expenses are in rubles. Because of this, when the ruble falls against the dollar, moving from 75:1, say, to 80:1, the government collects more rubles in taxes.
That is important because government expenses – pensions, salaries, military kit, and the like – are paid in rubles. By decreasing the value of the ruble against the dollar, the government earns more rubles and can thereby more easily meet its spending requirements.
At times when the government is running a large deficit, devaluation can help balance the budget. The Kremlin was going to struggle to hit its 3 percent deficit target this year given its oil price forecast of $50 per barrel – nearly twice the current price. Unless the oil price picks up in the coming months, that target looks highly unlikely. But by letting the value of the ruble fall, the government can counteract some of the negative budgetary effects of the price slump.
Letting the ruble fall against the dollar is by far the best way to adjust to the crisis. If Russia attempted to maintain the value of the ruble, it would have to spend down its over $300 billion in reserves, and it still would have struggled to counteract the powerful forces dragging the ruble downward. By letting the ruble depreciate, the Kremlin spreads the costs of adjustment across the population. Because of this, widespread discussion in Western media about the scale of Russian reserves is irrelevant – Russia isn’t spending reserves to fight the devaluation, it is welcoming it. That is why Russia’s reserves have stayed basically constant over the past year. Given current oil prices, the Central Bank would likely tolerate if not welcome some further depreciation.
The slump in the ruble is of course not a cost-free strategy. It imposes a “tax” on all holders of rubles who would like to purchase goods priced in foreign currency. Because Russia imports many consumer projects, from food to clothes to electronics, this means that almost every Russian is affected – not only the wealthy. The lower value of the ruble makes imported goods more expensive, driving up inflation. Because of the recession and the budget crunch, wages and pensions have increased only slightly over the past year. If you factor in the price increases of imports, the real value of most Russians’ wages and pensions have fallen.
The other main risk of a lower ruble is to the banking system. Many Russian banks have borrowed dollars or euros, but make profits in rubles. Now they need twice as many rubles as two years ago to pay back this debt. Worse still, many of the clients these banks lent to are in a similar position. Russian firms are struggling to pay off or refinance foreign currency debt.
If the ruble continues falling, making repayment of foreign currency debt ever harder, there is a risk that Russia’s banks go bust and the financial system stops functioning. But the government is aware of the risk, and has taken significant steps over the past year and a half to clean up poorly-managed banks and limit risk. The central bank has also offered long-term dollar-denominated loans to Russia’s banks in order to help them service customers who wish to refinance foreign currency debt. It is now easier and cheaper for many Russian firms to borrow dollars in Russia than to seek credit abroad. For now, the government has capably managed financial sector risk.
What does this mean for Russia’s foreign policy? There are two schools of thought. The first is that, given the upcoming Duma elections in September, the Kremlin may decide that the economic mess means that it has to campaign on its foreign policy “successes.” That could mean a more adventurous foreign policy, despite the costs such a decision entails.
The more optimistic view is that the oil price slump and the struggle to balance the budget will empower Russian elites who want to cut military costs and improve relations with the West. The recent flurry of diplomacy between Russian, Ukrainian, and U.S. officials may suggest that Russia’s position in Ukraine has softened. If that turns out to be true, it will not be the first time that Russia’s foreign ambitions were deflated by a plummeting oil price.
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https://www.jpost.com/international/article-755397
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How Russia can re-strengthen the ruble - analysis
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https://images.jpost.com/image/upload/f_auto,fl_lossy/c_fill,g_faces:center,h_407,w_690/548932
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[
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[
"ALEXEI BAYER"
] |
2023-08-20T01:04:00+00:00
|
With its latest decline, the ruble is worth only one US cent. That seems humiliating for the great power that Putin deems Russia to be.
|
en
|
The Jerusalem Post | JPost.com
|
https://www.jpost.com/international/article-755397
|
The Russian ruble has touched a key psychological barrier of 100 rubles per one US dollar. Its exchange rate is a mirror in which Russia’s sorry recent history is clearly reflected.
In the Soviet era there was constant talk in Pravda, the Communist Party newspaper, and various Marxist-Leninist economic journals, about the imminent demise of the dollar. Since Marx and Lenin had scientifically predicted the end of capitalism, it logically followed that the dollar should soon collapse.
And in fact the dollar was very sick – at least if you looked at the official ruble exchange-rate that was published daily in one of the Soviet papers. It almost never changed, and the ruble was allegedly worth $1.35, or only around 75 Soviet kopecks per dollar.
It was an excellent rate, but the problem was that you couldn’t just stop at your local branch of the State Savings Bank and exchange your rubles for dollars – or for any other currency for that matter.
And, since the ruble was not traded on any market, the exchange rate was not set by the laws of supply and demand but was arbitrarily decreed by the government.
If you were one of the few lucky Soviets allowed to travel abroad, the government would sell you foreign currency at this rate – but only a tiny amount. On the other hand, if you were an athlete, a musician or any other professional earning money abroad, you were obliged to surrender foreign currency to the government at that same rate – which in this case would turn from highly favorable to confiscatory.
Supply and demand did play a role in setting the dollar exchange rate, but only on the black market, where it could be anywhere between five and 10 rubles per dollar. However, holding foreign currency was a criminal offense. You could be packed off to jail for a long time. In the early 1960s, a group of young wheeler-dealers who bought dollars from foreigners was busted and its three leaders were sentenced to death by firing squad.
When communism collapsed, the inefficiencies of the Soviet command economy became obvious. The system was geared to make tanks and rockets but could produce nothing that people actually wanted to buy – few consumer goods, no consumer electronics, and not even decent or plentiful food. Once currency trading was decriminalized, it was the ruble that crumbled, not the dollar. This created a vicious cycle. The falling ruble led to inflation and inflation further undermined the ruble, creating even more inflation, etc. By the time the situation finally stabilized one dollar was worth 6,000 rubles.
At the start of 1998, the government effected a redenomination, slashing three zeros off the currency. That made the ruble respectable; in fact, it was then at parity with the French franc, with the exchange rate of six rubles per dollar. The problem was that in August of that year (August is a fateful month in the history of modern Russia), a financial crisis broke out and by early 1999 the dollar was worth 25 rubles.
Vladimir Putin's history
Vladimir Putin was appointed Russia’s prime minister in August 1999, which was another August disaster. In the early 2000s, he presided over a major run-up in energy prices that helped Russia achieve unprecedented prosperity. Russia became integrated into the world economy, and even ordinary Russians could travel abroad, flash their appreciating rubles and wonder why Paris, Berlin and London seemed cheap compared to Moscow.
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But Putin was pining away for the old Soviet Union, whose collapse he described in 2005 as “the greatest geopolitical catastrophe of the 20th century.” As Russia attacked Georgia, annexed Crimea, and finally, invaded Ukraine, relations with the West soured and Putin’s propaganda machine began turning back to Soviet rhetoric. Russians are now told that the West wants to destroy their country and steal its oil, that American democracy is sham and that Russia is the only country where citizens are truly free.
The imminent demise of the dollar is back as well. Washington is sinking under the burden of debt, dollars are pieces of paper not backed by any real assets, the dollar as the global reserve currency is finished and will soon be worthless.
But it has been the ruble that became worthless. Hand-in-hand with revived Soviet rhetoric came increasing isolation, a worsening business climate and declining foreign investment. Guns were increasingly produced at the expense of butter. Now that Russia has started a full-scale war in Europe and severe Western sanctions have been imposed, the ruble is plumbing the new depths.
With its latest decline, the ruble is worth only one US cent. That seems humiliating for the great power that Putin deems Russia to be. However, the Soviet experience provides not only the prediction of the demise of the greenback, but the remedy as well. All that is needed is for the ruble to stop trading, for the possession of foreign currency to be declared a felony, and for the central bank to set a more respectable exchange rate, something like $1.35 per ruble.
The writer, a New York-based economist, is a member of the US Andrei Sakharov Foundation. In 2005-08, he organized a support group for the Hebrew Immigrant Aid Society, bringing together Soviet Jewish immigrants in the United States.
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Commanding Heights : When Currencies Began to Float
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https://history.stackexchange.com/questions/62713/was-the-us-dollar-the-soviet-reserve-currency-too
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Was the US dollar, the Soviet reserve currency too?
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2021-02-02T01:10:15
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Was the Soviet rouble also backed by the US dollar, which was the global reserve currency at the time?
I remember reading something about Soviets taking aid from the US, in the 1970s, after Soviet ...
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https://cdn.sstatic.net/Sites/history/Img/favicon.ico?v=c55b54740769
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History Stack Exchange
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https://history.stackexchange.com/questions/62713/was-the-us-dollar-the-soviet-reserve-currency-too
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Clearing dollars
To understand why US dollar was reserve currency, you need to understand three things. One, US was definitely by far largest economy at the end of WW2. If you possessed US dollars, you could always trade them for US built goods which were plentiful. Consequently, traders across the world would also accept USD, effectively backing it up by not just US, but also world economy. Second, all of these above was formalized with Bretton Woods system, tying up other major (Western) currencies to USD. Finally, there was a petrodollar agreement where Saudi Arabia (and other Gulf monarchies) agreed to sell oil denominated exclusively in USD, in exchange for protection and backing of US and Western powers.
This left USSR in a predicament. Soviet ruble was backed by Soviet economy, but Soviet economy was much weaker then US economy. There were some things you simply could not buy with rubles, even if you had enormous quantities of them, because Soviet Union did not produce them. To back ruble with gold or silver was out of the question (even US abandoned gold standard) because there was simply not enough of these precious metals. There was a official exchange ratio between USD and ruble, but nobody in his right mind would sell dollars at that price unless forced to do so. Unofficially, ruble was worth much less on the black market, and people were still buying USD at inflated prices in order to purchase some consumer goods smuggled from the West or simply to use them as savings. Even countries in Soviet Block where not too keen to trade in rubles, and preferred USD when they could get them, because with USD they could trade not only with the West, but also with countries keeping themselves neutral in Cold War.
So what was to be done then ? Answer was clearing dollars. This simplified works like this: Neither you or I have USD because we do not trade much with evil capitalists in the West :) But, I have some fighter aircraft and you have grain. We agree that my fighter aircraft are worth $80 million, your grain $100 million, and IOU $20 million. Sometimes latter I could send you $30 million worth of cabbage, and you will send me $10 million worth of timber, and we are settled.
In this manner, although neither of us had real USD, we could still use them as a tool for barter. Of course, prices on these agreements would vary, sometimes they were realistic market prices at the moment, sometimes USSR helped some countries in order to gain prestige, sometimes those countries sold at discount etc ...
The Ruble wasn't backed by anything except the Soviet State. There were 2 completely separate economies in place within the USSR, one based on Rubles, one based on whatever foreign currency was available to the central bank. Technically there was a 3rd, a "certificate Ruble" that could be exchanged for foreign currency, but that was only available to foreign visitors and as a special reward for some citizens, and could only be used in certain special stores not open to the general public, with the exchange rate being set at whatever the Soviet central bank wanted.
So for foreign trade, you'd have to go to the appropriate government agency and request them to attain what you needed. They'd then go on the international market and purchase that for some of the very limited supplies of foreign currency available to the Soviet government. Ditto, if you had something to sell on the international market, you'd have to go through a government agency and they'd sell it for you, gaining foreign currency, and you'd then get paid by them in Rubles according to some imagined exchange rate (probably based on the amount you'd have gotten had you sold it within the USSR). Remember that it was actually illegal for most Soviet citizens to be in posession of foreign currency unless they were actually traveling abroad (which was pretty rare, most of them never left the country and would never get permission to do so if they requested it).
Given the Soviet Union & the United States were engaged in a prolonged cold war where each tried to showcase the supremacy their political and economic systems, the two countries were in competition with each other.
The both sought the demise of the other while trying to gain as much influence internationally. The US would not have backed the Soviet ruble, instead it would have done what it could have to damage the ruble and ruin the Soviet economy to neutralize the threat that the Soviet Union then posed to the United States.
With the abandonment of the gold standard and the adoption of the 1944 Bretton Woods agreement, the US dollar eventually became the dominant currency used in international trade. It is for this reason that the Soviet Union had US dollars, so it could trade with non Warsaw Pact countries.
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Russia’s ruble has tumbled. What does it mean for the wartime economy?
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2023-08-15T13:12:53+00:00
|
The Russian ruble has fallen a long way in recent months, and the country's central bank is stepping in to halt the slide.
|
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/apple-touch-icon.png
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AP News
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https://apnews.com/article/why-is-ruble-falling-ee777eeaf897d42befae052336fc35d5
|
Russia’s ruble has fallen a long way in recent months, and the country’s central bank has stepped in to try to halt the slide.
Until now, the government stood aside as the declining ruble helped its budget. But a weaker currency also poses the threat of higher prices for everyday people in Russia — and the government has finally moved to halt the drop.
Here are key things to know:
WHY IS THE RUBLE FALLING?
Russia is selling less abroad — mainly reflected in falling revenue from oil and natural gas — and it’s importing more. People or companies importing goods to Russia means selling rubles for foreign currency like dollars or euros. That lowers the ruble’s exchange rate.
Russia’s trade surplus — meaning it sells more goods than it buys — has shrunk. Previously, Russia saw a large trade surplus — which typically supports a country’s currency — because of high oil prices and plummeting imports after invading Ukraine.
But oil prices have dipped this year, and it’s more cumbersome for Russia to sell its oil due to Western sanctions, including price caps on crude and oil products like diesel.
Meanwhile, imports have started to recover after nearly a year and a half of war as Russians find ways around sanctions. Some trade has been rerouted to Asian countries that are not participating in sanctions. And importers have found ways to ship goods through nearby countries such as Armenia, Georgia and Kazakhstan.
At the same time, Russia has ramped up defense spending, pumping money into companies that make weapons, for instance. Companies must import parts and raw materials, while some government money winds up in the pockets of workers who buy imported goods.
That government spending, along with the willingness of India and China to buy Russia oil, is helping the economy perform better than many had expected. The International Monetary Fund said last month that it expects Russia’s economy to grow 1.5% this year.
WHY DID THE CENTRAL BANK RAISE INTEREST RATES?
To fight inflation, first of all.
A weaker ruble worsens inflation by making imports more expensive in Russian currency. And the ruble’s weakness is increasingly being passed through to prices people pay. Inflation hit 7.6% over the past three months.
Higher interest rates will make it more expensive to get credit, and that should limit domestic demand for goods — including imports. So the central bank is trying to cool off the domestic economy to lower inflation.
It raised its key interest rate from 8.5% to 12% at an emergency meeting Tuesday after the ruble’s fall was criticized by a Kremlin economic adviser.
DOES THIS MEAN SANCTIONS ARE WORKING?
Sanctions are having an impact even if they are not collapsing the economy. Exports — and thus the ruble — have fallen because Western allies have boycotted Russian oil and imposed a price cap on oil exports to non-Western nations. The sanctions prevent insurers or shippers who are mainly based in the West from handling Russian oil above $60 a barrel.
The cap and boycott have forced Russia to sell at a discount and take expensive steps such as obtaining a fleet of ghost tankers that are beyond the reach of sanctions.
However, higher oil prices have recently sent the cost of Moscow’s supplies above the price cap, the International Energy Agency said in an August report.
Oil revenue fell 23% in the first half of this year but Russia still earned $425 million a day from oil sales, according to the Kyiv School of Economics.
The rebound in imports shows that Russia is finding ways around sanctions and boycotts. It’s expensive and cumbersome, but if someone needs an iPhone or a Western-made car, they can get it.
IS RUSSIA HAVING AN ECONOMIC CRISIS?
No, says Chris Weafer, CEO of Macro-Advisory Ltd. “The lower ruble is partly a reflection of the effect of sanctions, but it doesn’t indicate an underlying economic crisis.”
The falling ruble actually has helped the government with its budget. It means more rubles for every dollar of earnings from oil and other products Russia sells. That bolsters spending on the military and on social programs aimed at blunting the impact of sanctions on the Russian people.
“They’ve tried to compensate for the drop in the dollar value of oil receipts with the weaker ruble, so that therefore the deficit in terms of spending could be contained and more manageable,” Weafer said.
Amid sanctions and restrictions on moving money out of the country, the ruble exchange rate is largely in the hands of the central bank, Weafer said. It can tell major exporters when to exchange their dollar earnings into Russian currency.
“The weakness was planned, but it’s overdone and they want to pull it back,” Weafer said.
Janis Kluge, a Russian economy expert at the German Institute for International and Security Affairs, said the ruble decline is “not very welcome” to the Kremlin.
While not a full-blown crisis, “this is the closest we came to a real economic problem since the start of the war,” Kluge said.
The chaos at the start of sanctions was far worse, but since then, the ruble decline “is the first time that something seems to be not so much under control,” he said.
Any boost to the budget from a lower ruble, he said, is offset by higher spending on government wages and pensions, which are indexed to the inflation caused by the lower ruble.
“Whatever gives the impression of a weak or unstable economy is not welcomed by the Russian government,” he said. “In Russia, the exchange rate is always seen as the most important indicator of the health of the economy.”
WHAT DOES THIS MEAN FOR RUSSIANS?
Inflation caused by ruble devaluation hits low-income people hard because they spend more on necessities like food.
While higher interest rates will dampen economic growth, relieving some pressure on prices, the government is unlikely to back off on military spending.
“So it’s a clear prioritization of the government of this war over the welfare of households,” Kluge said.
Foreign travel — enjoyed mostly by a minority in big cities like Moscow and St. Petersburg — gets much more expensive with a weaker ruble.
“The instability of the national currency always has a not so good impact,” said Dina Solovyova, 51, a veterinarian. “Most likely, this will affect ordinary people, because the rise in prices for everything will surely follow. We’ll wait and see.”
Nikolay Rubtsov, a 20-year-old student, indicated he wasn’t much disturbed by the ruble’s fall.
“This is all temporary. I think everything will be back to normal soon. I don’t think it can last long,” Rubtsov said in Moscow.
___
This story was first published Aug. 15, 2023. It was updated on Aug. 31, 2023, to correct the name of Chris Weafer’s firm. It is Macro-Advisory Ltd, not Macro Advisory Partners.
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https://apnews.com/article/russia-ruble-sanctions-war-ukraine-cf5448603b78f1bb884f3c68df5c7cd5
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Russia’s ruble hits its lowest level since early in the war. The central bank plans to step in
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2023-08-14T11:18:33+00:00
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The Russian ruble has reached its lowest value since the early weeks of the war in Ukraine as Moscow increases military spending and Western sanctions weigh on its energy exports.
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AP News
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https://apnews.com/article/russia-ruble-sanctions-war-ukraine-cf5448603b78f1bb884f3c68df5c7cd5
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LONDON (AP) — The Russian ruble on Monday reached its lowest value since the early weeks of the war in Ukraine as Moscow increases military spending and Western sanctions weigh on its energy exports.
It led Russia’s central bank to announce an emergency meeting for Tuesday to review its key interest rate, raising the likelihood of an increase in borrowing costs that would support the flagging ruble.
The Russian currency had passed 101 rubles to the dollar, continuing a more than one-third decline in its value since the beginning of the year and hitting the lowest level in almost 17 months. The ruble recovered slightly after the central bank’s announcement.
The meeting was set after President Vladimir Putin’s economic adviser, Maksim Oreshkin, blamed the weak ruble on “loose monetary policy” in an op-ed Monday for state news agency Tass. He said a strong ruble is in the interest of the Russian economy and that a weak currency “complicates economic restructuring and negatively affects people’s real incomes.”
Oreshkin said Russia’s central bank has “all the tools necessary” to stabilize the situation and said he expected normalization shortly.
Bank deputy director Alexei Zabotkin told reporters Friday that it is adhering to a floating exchange rate because “it allows the economy to effectively adapt to changing external conditions.”
Analysts say the weakening of the ruble is being driven by increased defense spending — leading imports to rise — and falling exports, particularly in the oil and natural gas sector. Importing more and exporting less means a smaller trade surplus, which typically weighs on a country’s currency.
The Russian economy is now “working on different types of state orders related to the war, such as textile enterprises, pharmaceuticals and the food industry,” said Alexandra Prokopenko, nonresident scholar at the Carnegie Russia Eurasia Center and a former Russian central bank official.
Pivoting the entire economy to a war footing not only drives up imports but also raises the prospect of worsening inflation, she said.
To help lessen that prospect, the central bank said last week that it would stop buying foreign currency on the domestic market until the end of the year to try to prop up the ruble and reduce volatility.
Russia typically sells foreign currency to counter any shortfall in revenue from oil and natural gas exports and buys currency if it has a surplus.
The central bank also enacted a big increase of 1% to its key interest rate last month, saying inflation is expected to keep rising and the fall in the ruble is adding to the risk. The next meeting to discuss Russia’s key interest rate was planned for 15 September.
On Monday, some Russians in Moscow appeared concerned about the weakening currency.
“Prices will rise, which means that the standard of living will fall. It has already fallen, and it will fall even more — there are definitely more poor people,” said Vladimir Bessosedny, 63, a retired teacher.
Others hoped the fall of the ruble was temporary and that it would stabilize.
In January, the ruble traded at about 66 to the dollar but lost about a third of its value in subsequent months.
After Western countries imposed sanctions after the invasion of Ukraine in February 2022, the ruble plunged as low as 130 to the dollar, but the central bank enacted capital controls that stabilized its value. By last summer, it was in the 50-60 range to the dollar.
Zabotkin on Friday dismissed speculation that capital flight from Russia also was to blame for the ruble’s fall, saying the idea was “not substantiated.”
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https://www.cia.gov/the-world-factbook/countries/russia/
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The World Factbook
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Introduction
Background
Founded in the 12th century, the Principality of Muscovy emerged from over 200 years of Mongol domination (13th-15th centuries) and gradually conquered and absorbed surrounding principalities. In the early 17th century, a new ROMANOV dynasty continued this policy of expansion across Siberia to the Pacific. Under PETER I (1682-1725), hegemony was extended to the Baltic Sea and the country was renamed the Russian Empire. During the 19th century, more territorial acquisitions were made in Europe and Asia. Defeat in the Russo-Japanese War of 1904-05 contributed to the Revolution of 1905, which resulted in the formation of a parliament and other reforms. Devastating defeats and food shortages in World War I led to widespread rioting in the major cities of the Russian Empire and to the overthrow of the ROMANOV Dynasty in 1917. The communists under Vladimir LENIN seized power soon after and formed the Union of Soviet Socialist Republics (USSR).
The brutal rule of Iosif STALIN (1928-53) strengthened communist control and Russian dominance of the Soviet Union at a cost of tens of millions of lives. After defeating Germany in World War II as part of an alliance with the US (1939-1945), the USSR expanded its territory and influence in Eastern Europe and emerged as a global power. The USSR was the principal US adversary during the Cold War (1947-1991). The Soviet economy and society stagnated in the decades following Stalin's rule, until General Secretary Mikhail GORBACHEV (1985-91) introduced glasnost (openness) and perestroika (restructuring) in an attempt to modernize communism. His initiatives inadvertently released political and economic forces that by December 1991 led to the dissolution of the USSR into Russia and 14 other independent states. In response to the ensuing turmoil during President Boris YELTSIN's term (1991-99), Russia shifted toward a centralized authoritarian state under President Vladimir PUTIN (2000-2008, 2012-present) in which the regime seeks to legitimize its rule through managed elections, populist appeals, a foreign policy focused on enhancing the country's geopolitical influence, and commodity-based economic growth.
In 2014, Russia purported to annex Ukraine's Crimean Peninsula and occupied large portions of two eastern Ukrainian oblasts. In sporadic fighting over the next eight years, more than 14,000 civilians were killed or wounded as a result of the Russian invasion in eastern Ukraine. On 24 February 2022, Russia escalated its conflict with Ukraine by invading the country on several fronts in what has become the largest conventional military attack on a sovereign state in Europe since World War II. The invasion received near-universal international condemnation, and many countries imposed sanctions on Russia and supplied humanitarian and military aid to Ukraine. In September 2022, Russia unilaterally declared its annexation of four Ukrainian oblasts -- Donetsk, Kherson, Luhansk, and Zaporizhzhia -- even though none were fully under Russian control. The annexations remain unrecognized by the international community.Â
Geography
Location
North Asia bordering the Arctic Ocean, extending from Eastern Europe (the portion west of the Urals) to the North Pacific Ocean
Geographic coordinates
60 00 N, 100 00 E
Map references
Asia
Area
total : 17,098,242 sq km
land: 16,377,742 sq km
water: 720,500 sq km
comparison ranking : total 1
Area - comparative
approximately 1.8 times the size of the US
Area comparison map :
Land boundaries
total: 22,407 km
border countries (14): Azerbaijan 338 km; Belarus 1,312 km; China (southeast) 4,133 km and China (south) 46 km; Estonia 324 km; Finland 1,309 km; Georgia 894 km; Kazakhstan 7,644 km; North Korea 18 km; Latvia 332 km; Lithuania (Kaliningrad Oblast) 261 km; Mongolia 3,452 km; Norway 191 km; Poland (Kaliningrad Oblast) 209 km; Ukraine 1,944 km
Coastline
37,653 km
Maritime claims
territorial sea: 12 nm
contiguous zone: 24 nm
exclusive economic zone: 200 nm
continental shelf: 200-m depth or to the depth of exploitation
Climate
ranges from steppes in the south through humid continental in much of European Russia; subarctic in Siberia to tundra climate in the polar north; winters vary from cool along Black Sea coast to frigid in Siberia; summers vary from warm in the steppes to cool along Arctic coast
Terrain
broad plain with low hills west of Urals; vast coniferous forest and tundra in Siberia; uplands and mountains along southern border regions
Elevation
highest point: Gora El'brus (highest point in Europe) 5,642 m
lowest point: Caspian Sea -28 m
mean elevation: 600 m
Natural resources
wide natural-resource base including major deposits of oil, natural gas, coal, and many strategic minerals, bauxite, reserves of rare earth elements, timber
note:Â formidable obstacles of climate, terrain, and distance hinder exploitation of natural resources
Land use
agricultural land: 13.1% (2018 est.)
arable land: 7.3% (2018 est.)
permanent crops: 0.1% (2018 est.)
permanent pasture: 5.7% (2018 est.)
forest: 49.4% (2018 est.)
other: 37.5% (2018 est.)
Irrigated land
43,000 sq km (2012)
Major lakes (area sq km)
fresh water lake(s): Lake Baikal - 31,500 sq km; Lake Ladoga - 18,130 sq km; Lake Onega - 9,720 sq km; Lake Khanka (shared with China) - 5,010 sq km; Lake Peipus - 4,300 sq km (shared with Estonia); Ozero Vygozero - 1,250 sq km; Ozero Beloye - 1,120 sq km
salt water lake(s): Caspian Sea (shared with Iran, Azerbaijan, Turkmenistan, and Kazakhstan) - 374,000 sq km; Ozero Malyye Chany - 2,500 sq km; Curonian Lagoon (shared with Lithuania) - 1,620 sq km
note - the Caspian Sea is the World's largest lake
Major rivers (by length in km)
Yenisey-Angara - 5,539 km; Ob-Irtysh - 5,410 km;Â Amur river mouth (shared with China [s] and Mongolia) - 4,444 km; Lena - 4,400 km; Volga - 3,645 km; Kolyma - 2,513 km; Ural river source (shared with Kazakhstan [m]) - 2,428 km; Dnepr (Dnieper) river source (shared with Belarus and Ukraine [m]) - 2,287 km; Don - 1,870 km; Pechora - 1,809 km
note â [s] after country name indicates river source; [m] after country name indicates river mouth
Major watersheds (area sq km)
Arctic Ocean drainage: Kolyma (679,934 sq km), Lena (2,306,743 sq km), Ob (2,972,493 sq km), Pechora (289,532 sq km), Yenisei (2,554,388 sq km)
Atlantic Ocean drainage: (Black Sea)Â Don (458,694 sq km), Dnieper (533,966 sq km)
Pacific Ocean drainage: Amur (1,929,955 sq km)
Internal (endorheic basin) drainage: (Caspian Sea basin) Volga (1,410,951 sq km)
Major aquifers
Angara-Lena Basin, Pechora Basin, North Caucasus Basin, East European Aquifer System, West Siberian Basin, Tunguss Basin, Yakut Basin
Population distribution
population is heavily concentrated in the westernmost fifth of the country extending from the Baltic Sea, south to the Caspian Sea, and eastward parallel to the Kazakh border; elsewhere, sizeable pockets are isolated and generally found in the south
Natural hazards
permafrost over much of Siberia is a major impediment to development; volcanic activity in the Kuril Islands; volcanoes and earthquakes on the Kamchatka Peninsula; spring floods and summer/autumn forest fires throughout Siberia and parts of European Russia
volcanism: significant volcanic activity on the Kamchatka Peninsula and Kuril Islands; the peninsula alone is home to some 29 historically active volcanoes, with dozens more in the Kuril Islands; Kliuchevskoi (4,835 m), which erupted in 2007 and 2010, is Kamchatka's most active volcano; Avachinsky and Koryaksky volcanoes, which pose a threat to the city of Petropavlovsk-Kamchatsky, have been deemed Decade Volcanoes by the International Association of Volcanology and Chemistry of the Earth's Interior, worthy of study due to their explosive history and close proximity to human populations; other notable historically active volcanoes include Bezymianny, Chikurachki, Ebeko, Gorely, Grozny, Karymsky, Ketoi, Kronotsky, Ksudach, Medvezhia, Mutnovsky, Sarychev Peak, Shiveluch, Tiatia, Tolbachik, and Zheltovsky; see note 2 under "Geography - note"
Geography - note
note 1: largest country in the world in terms of area but unfavorably located in relation to major sea lanes of the world; despite its size, much of the country lacks proper soils and climates (either too cold or too dry) for agriculture
note 2: Russia's far east, particularly the Kamchatka Peninsula, lies along the Ring of Fire, a belt of active volcanoes and earthquake epicenters bordering the Pacific Ocean; up to 90% of the world's earthquakes and some 75% of the world's volcanoes occur within the Ring of Fire
note 3: Mount El'brus is Europe's tallest peak; Lake Baikal, the deepest lake in the world, is estimated to hold one fifth of the world's fresh surface water
note 4: Kaliningrad oblast is an exclave annexed from Germany following World War II (it was formerly part of East Prussia); its capital city of Kaliningrad -- formerly Koenigsberg -- is the only Baltic port in Russia that remains ice free in the winter
People and Society
Population
total: 140,820,810
male: 65,496,805
female: 75,324,005 (2024 est.)
comparison rankings : female 9; male 9; total 9
Nationality
noun: Russian(s)
adjective: Russian
Ethnic groups
Russian 77.7%, Tatar 3.7%, Ukrainian 1.4%, Bashkir 1.1%, Chuvash 1%, Chechen 1%, other 10.2%, unspecified 3.9% (2010 est.)
note: nearly 200 national and/or ethnic groups are represented in Russia's 2010 census
Languages
Russian (official) 85.7%, Tatar 3.2%, Chechen 1%, other 10.1% (2010 est.)
major-language sample(s):
Ðнига ÑакÑов о миÑе â незаменимÑй иÑÑоÑник базовой инÑоÑмаÑии. (Russian)
The World Factbook, the indispensable source for basic information.
note:Â data represent native language spoken
Russian audio sample :
Religions
Russian Orthodox 15-20%, Muslim 10-15%, other Christian 2% (2006 est.)
note: estimates are of practicing worshipers; Russia has large populations of non-practicing believers and non-believers, a legacy of over seven decades of official atheism under Soviet rule; Russia officially recognizes Orthodox Christianity, Islam, Judaism, and Buddhism as the country's traditional religions
Age structure
0-14 years: 16.5% (male 11,956,284/female 11,313,829)
15-64 years: 65.7% (male 45,007,073/female 47,518,221)
65 years and over: 17.8% (2024 est.) (male 8,533,448/female 16,491,955)
2023 population pyramid :
Dependency ratios
total dependency ratio: 50
youth dependency ratio: 26.6
elderly dependency ratio: 23.4
potential support ratio: 4.3 (2021 est.)
Median age
total: 41.9 years (2024 est.)
male: 39.4 years
female: 44.5 years
comparison ranking : total 48
Population growth rate
-0.49% (2024 est.)
comparison ranking : 221
Birth rate
8.4 births/1,000 population (2024 est.)
comparison ranking : 209
Death rate
14 deaths/1,000 population (2024 est.)
comparison ranking : 9
Net migration rate
0.8 migrant(s)/1,000 population (2024 est.)
comparison ranking : 68
Population distribution
population is heavily concentrated in the westernmost fifth of the country extending from the Baltic Sea, south to the Caspian Sea, and eastward parallel to the Kazakh border; elsewhere, sizeable pockets are isolated and generally found in the south
Urbanization
urban population: 75.3% of total population (2023)
rate of urbanization: 0.11% annual rate of change (2020-25 est.)
total population growth rate v. urban population growth rate, 2000-2030
Major urban areas - population
12.680 million MOSCOW (capital), 5.561 million Saint Petersburg, 1.695 million Novosibirsk, 1.528 million Yekaterinburg, 1.292 million Kazan, 1.251 million Nizhniy Novgorod (2023)
Sex ratio
at birth: 1.06 male(s)/female
0-14 years: 1.06 male(s)/female
15-64 years: 0.95 male(s)/female
65 years and over: 0.52 male(s)/female
total population: 0.87 male(s)/female (2024 est.)
Mother's mean age at first birth
25.2 years (2013 est.)
Maternal mortality ratio
14 deaths/100,000 live births (2020 est.)
comparison ranking : 138
Infant mortality rate
total: 6.5 deaths/1,000 live births (2024 est.)
male: 7.2 deaths/1,000 live births
female: 5.8 deaths/1,000 live births
comparison ranking : total 162
Life expectancy at birth
total population: 72.3 years (2024 est.)
male: 67.4 years
female: 77.4 years
comparison ranking : total population 164
Total fertility rate
1.52 children born/woman (2024 est.)
comparison ranking : 199
Gross reproduction rate
0.74 (2024 est.)
Contraceptive prevalence rate
68% (2011)
note: percent of women aged 15-44
Drinking water source
improved: urban: 99.1% of population
rural: 93.1% of population
total: 97.6% of population
unimproved: urban: 0.9% of population
rural: 6.9% of population
total: 2.4% of population (2020 est.)
Current health expenditure
7.6% of GDP (2020)
Physician density
3.82 physicians/1,000 population (2020)
Hospital bed density
7.1 beds/1,000 population (2018)
Sanitation facility access
improved: urban: 95.2% of population
rural: 72.3% of population
total: 89.4% of population
unimproved: urban: 4.8% of population
rural: 27.7% of population
total: 10.6% of population (2020 est.)
Major infectious diseases
degree of risk: intermediate (2023)
food or waterborne diseases: bacterial diarrhea
vectorborne diseases: Crimean-Congo hemorrhagic fever, tickborne encephalitis
Obesity - adult prevalence rate
23.1% (2016)
comparison ranking : 70
Alcohol consumption per capita
total: 7.29 liters of pure alcohol (2019 est.)
beer: 3.04 liters of pure alcohol (2019 est.)
wine: 0.97 liters of pure alcohol (2019 est.)
spirits: 3.16 liters of pure alcohol (2019 est.)
other alcohols: 0.12 liters of pure alcohol (2019 est.)
comparison ranking : total 56
Tobacco use
total: 26.8% (2020 est.)
male: 40.8% (2020 est.)
female: 12.8% (2020 est.)
comparison ranking : total 41
Children under the age of 5 years underweight
NA
Currently married women (ages 15-49)
53.1% (2023 est.)
Child marriage
women married by age 15: 0.3%
women married by age 18: 6.2% (2017 est.)
Education expenditures
3.7% of GDP (2020 est.)
comparison ranking : 132
Literacy
definition: age 15 and over can read and write
total population: 99.7%
male: 99.7%
female: 99.7% (2018)
School life expectancy (primary to tertiary education)
total: 16 years
male: 16 years
female: 16 years (2019)
Government
Country name
conventional long form: Russian Federation
conventional short form: Russia
local long form: Rossiyskaya Federatsiya
local short form: Rossiya
former: Russian Empire, Russian Soviet Federative Socialist Republic
etymology: Russian lands were generally referred to as Muscovy until PETER I officially declared the Russian Empire in 1721; the new name sought to invoke the patrimony of the medieval eastern European Rus state centered on Kyiv in present-day Ukraine; the Rus were a Varangian (eastern Viking) elite that imposed their rule and eventually their name on their Slavic subjects
Government type
semi-presidential federation
Capital
name: Moscow
geographic coordinates: 55 45 N, 37 36 E
time difference: UTC+3 (8 hours ahead of Washington, DC, during Standard Time)
daylight saving time: does not observe daylight savings time (DST)
time zone note: Russia has 11 time zones, the largest number of contiguous time zones of any country in the world; in 2014, two time zones were added and DST dropped
etymology: named after the Moskva River; the origin of the river's name is obscure but may derive from the appellation "Mustajoki" given to the river by the Finno-Ugric people who originally inhabited the area and whose meaning may have been "dark" or "turbid"
Administrative divisions
46 provinces (oblasti, singular - oblast), 21 republics (respubliki, singular - respublika), 4 autonomous okrugs (avtonomnyye okrugi, singular - avtonomnyy okrug), 9 krays (kraya, singular - kray), 2 federal cities (goroda, singular - gorod), and 1 autonomous oblast (avtonomnaya oblast')
oblasts: Amur (Blagoveshchensk), Arkhangelsk, Astrakhan, Belgorod, Bryansk, Chelyabinsk, Irkutsk, Ivanovo, Kaliningrad, Kaluga, Kemerovo, Kirov, Kostroma, Kurgan, Kursk, Leningrad (Gatchina), Lipetsk, Magadan, Moscow, Murmansk, Nizhniy Novgorod, Novgorod, Novosibirsk, Omsk, Orenburg, Orel, Penza, Pskov, Rostov, Ryazan, Sakhalin (Yuzhno-Sakhalinsk), Samara, Saratov, Smolensk, Sverdlovsk (Yekaterinburg), Tambov, Tomsk, Tula, Tver, Tyumen, Ulyanovsk, Vladimir, Volgograd, Vologda, Voronezh, Yaroslavl
republics: Adygeya (Maykop), Altay (Gorno-Altaysk), Bashkortostan (Ufa), Buryatiya (Ulan-Ude), Chechnya (Groznyy), Chuvashiya (Cheboksary), Dagestan (Makhachkala), Ingushetiya (Magas), Kabardino-Balkariya (Nal'chik), Kalmykiya (Elista), Karachayevo-Cherkesiya (Cherkessk), Kareliya (Petrozavodsk), Khakasiya (Abakan), Komi (Syktyvkar), Mariy-El (Yoshkar-Ola), Mordoviya (Saransk), North Ossetia (Vladikavkaz), Sakha [Yakutiya] (Yakutsk), Tatarstan (Kazan), Tyva (Kyzyl), Udmurtiya (Izhevsk)
autonomous okrugs: Chukotka (Anadyr'), Khanty-Mansi-Yugra (Khanty-Mansiysk), Nenets (Nar'yan-Mar), Yamalo-Nenets (Salekhard)
krays: Altay (Barnaul), Kamchatka (Petropavlovsk-Kamchatskiy), Khabarovsk, Krasnodar, Krasnoyarsk, Perm, Primorskiy [Maritime] (Vladivostok), Stavropol, Zabaykalsk [Transbaikal] (Chita)
federal cities: Moscow [Moskva], Saint Petersburg [Sankt-Peterburg]
autonomous oblast: Yevreyskaya [Jewish] (Birobidzhan)
note 1: administrative divisions have the same names as their administrative centers (exceptions have the administrative center name following in parentheses)
note 2: the United States does not recognize Russia's annexation of Ukraine's Autonomous Republic of Crimea and the municipality of Sevastopol, nor their redesignation as the "Republic of Crimea" and the "Federal City of Sevastopol"; it similarly does not recognize the annexation of the Ukrainian oblasts Donetsk, Luhansk, Zaporizhzhia, and Kherson
Independence
25 December 1991 (from the Soviet Union; Russian SFSR renamed Russian Federation); notable earlier dates: 1157 (Principality of Vladimir-Suzdal created); 16 January 1547 (Tsardom of Muscovy established); 22 October 1721 (Russian Empire proclaimed); 30 December 1922 (Soviet Union established)
National holiday
Russia Day, 12 June (1990); note - commemorates the adoption of the Declaration of State Sovereignty of the Russian Soviet Federative Socialist Republic (RSFSR)
Legal system
civil law system; judicial review of legislative acts
Constitution
history: several previous (during Russian Empire and Soviet era); latest drafted 12 July 1993, adopted by referendum 12 December 1993, effective 25 December 1993
amendments: proposed by the president of the Russian Federation, by either house of the Federal Assembly, by the government of the Russian Federation, or by legislative (representative) bodies of the Federation's constituent entities; proposals to amend the governmentâs constitutional system, human and civil rights and freedoms, and procedures for amending or drafting a new constitution require formation of a Constitutional Assembly; passage of such amendments requires two-thirds majority vote of its total membership; passage in a referendum requires participation of an absolute majority of eligible voters and an absolute majority of valid votes; approval of proposed amendments to the government structure, authorities, and procedures requires approval by the legislative bodies of at least two thirds of the Russian Federation's constituent entities; amended several times, last in 2020 (major revisions)
International law organization participation
has not submitted an ICJ jurisdiction declaration; non-party state to the ICCt
Citizenship
citizenship by birth: no
citizenship by descent only: at least one parent must be a citizen of Russia
dual citizenship recognized: yes
residency requirement for naturalization: 3-5 years
Suffrage
18 years of age; universal
Executive branch
chief of state: President Vladimir Vladimirovich PUTIN (since 7 May 2012)
head of government: Premier Mikhail Vladimirovich MISHUSTIN (since 16 January 2020)
cabinet: the government is composed of the premier, his deputies, and ministers, all appointed by the president; the premier is also confirmed by the Duma
elections/appointments: president directly elected by absolute majority popular vote in 2 rounds if needed for a 6-year term (2020 constitutional amendments allow a second consecutive term); election last held on 15 to 17 March 2024 (next to be held 2030)
election results:
2024: Vladimir PUTIN reelected president; percent of vote - Vladimir PUTIN (independent) 88.5%, Nikolay KHARITONOV (Communist Party) 4.4%, Vladislav DAVANKOV (New People party) 3.9%, Leonid SLUTSKY (Liberal Democrats) 3.2%
2018: Vladimir PUTIN reelected president; percent of vote - Vladimir PUTIN (independent) 77.5%, Pavel GRUDININ (CPRF) 11.9%, Vladimir ZHIRINOVSKIY (LDPR) 5.7%, other 4.9%; Mikhail MISHUSTIN (independent) approved as premier by Duma; vote - 383 to 0
2012: Vladimir PUTIN elected president; percent of vote - Vladimir PUTIN (United Russia) 63.6%, Gennadiy ZYUGANOV (CPRF) 17.2%, Mikhail PROKHOROV (CP) 8%, Vladimir ZHIRINOVSKIY (LDPR) 6.2%, Sergey MIRONOV (A Just Russia) 3.9%, other 1.1%; Dmitriy MEDVEDEV (United Russia) approved as premier by Duma; vote - 299 to 144
note: there is also a Presidential Administration that provides staff and policy support to the president, drafts presidential decrees, and coordinates policy among government agencies; a Security Council also reports directly to the president
Legislative branch
description: bicameral Federal Assembly or Federalnoye Sobraniye consists of:
Federation Council or Sovet Federatsii (170 seats statutory, 169 as of April 2023; 2 members in each of the 83 federal administrative units (see note below) - oblasts, krays, republics, autonomous okrugs and oblasts, and federal cities of Moscow and Saint Petersburg - appointed by the top executive and legislative officials; members serve 4-year terms)
State Duma or Gosudarstvennaya Duma (450 seats (see note below); as of February 2014, the electoral system reverted to a mixed electoral system for the 2016 election, in which one-half of the members are directly elected by simple majority vote and one-half directly elected by proportional representation vote; members serve 5-year terms)
elections: State Duma - last held 17 - 19 September 2021 (next to be held in September 2026)
election results: Federation Council - composition - men 137, women 32, percentage women 18.9%
State Duma - percent vote by party - United Russia 50.9%, CPRF 19.3%, LDPR 7.7%, A Just Russia 7.6%, New People 5.3% other minor parties and independents 9.2%; seats by party - United Russia 324, CPRF 57, LDPR 21, A Just Russia 27, New People 13; Rodina 1, CP 1, Party of Growth 1, independent 5; composition - men 376, women 74, percentage women 16.4%; total Federal Assembly percentage women 17.1%
note 1: the State Duma now includes 3 representatives from the "Republic of Crimea," while the Federation Council includes 2 each from the "Republic of Crimea" and the "Federal City of Sevastopol," both regions that Russia occupied and attempted to annex from Ukraine and that the US does not recognize as part of Russia
Judicial branch
highest court(s): Supreme Court of the Russian Federation (consists of 170 members organized into the Judicial Panel for Civil Affairs, the Judicial Panel for Criminal Affairs, and the Military Panel); Constitutional Court (consists of 11 members, including the chairperson and deputy); note - in February 2014, Russiaâs Higher Court of Arbitration was abolished and its former authorities transferred to the Supreme Court, which in addition is the countryâs highest judicial authority for appeals, civil, criminal, administrative, and military cases, and the disciplinary judicial board, which has jurisdiction over economic disputes
judge selection and term of office: all members of Russia's 3 highest courts nominated by the president and appointed by the Federation Council (the upper house of the legislature); members of all 3 courts appointed for life
subordinate courts: regional (kray) and provincial (oblast) courts; Moscow and St. Petersburg city courts; autonomous province and district courts; note - the 21 Russian Republics have court systems specified by their own constitutions
Political parties
A Just Russia or SRZP
Civic Platform or GP
Communist Party of the Russian Federation or KPRF
Liberal Democratic Party of Russia or LDPR
New People NL
Party of Growth PR
Rodina
United Russia ER
International organization participation
APEC, Arctic Council, ARF, ASEAN (dialogue partner), BIS, BRICS, BSEC, CBSS, CD, CE, CERN (observer), CICA, CIS, CSTO, EAEC, EAEU, EAPC, EAS, EBRD, FAO, FATF, G-20, GCTU, IAEA, IBRD, ICAO, ICC (national committees), ICRM, IDA, IFAD, IFC, IFRCS, IHO, ILO, IMF, IMO, IMSO, Interpol, IOC, IOM (observer), IPU, ISO, ITSO, ITU, ITUC (NGOs), LAIA (observer), MIGA, MINURSO, MONUSCO, NEA, NSG, OAS (observer), OIC (observer), OPCW, OSCE, Paris Club, PCA, PFP, SCO, UN, UNCTAD, UNESCO, UNHCR, UNIDO, UNISFA, UNMIL, UNMISS, UNOCI, UN Security Council (permanent), UNTSO, UNWTO, UPU, Wassenaar Arrangement, WCO, WFTU (NGOs), WHO, WIPO, WMO, WTO, ZC
Diplomatic representation in the US
chief of mission: Ambassador Anatoly Ivanovich ANTONOV (since 8 September 2017)
chancery: 2650 Wisconsin Avenue NW, Washington, DC 20007
telephone: [1] (202) 298-5700
FAX: [1] (202) 298-5735
email address and website:
rusembusa@mid.ru
https://washington.mid.ru/en/
consulate(s) general: Houston, New York
Diplomatic representation from the US
chief of mission: Ambassador Lynne M. TRACY (30 January 2023)
embassy: 55,75566° N, 37,58028° E
mailing address: 5430 Moscow Place, Washington DCÂ 20521-5430
telephone: [7] (495) 728-5000
FAX: [7] (495) 728-5090
email address and website:
MoscowACS@state.gov
https://ru.usembassy.gov/
consulate(s) general: Vladivostok (suspended status), Yekaterinburg (suspended status)
Flag description
three equal horizontal bands of white (top), blue, and red
note: the Russian flag was created when Russia built its first naval vessels, and was used mostly as a naval ensign until the nineteenth century; the colors may have been based on those of the Dutch flag; despite many popular interpretations, there is no official meaning assigned to the colors of the Russian flag; the flag inspired several other Slavic countries to adopt horizontal tricolors of the same colors but in different arrangements, and so red, blue, and white became the Pan-Slav colors
National symbol(s)
bear, double-headed eagle; national colors: white, blue, red
Coat of Arms of Russia :
National anthem
name: "Gimn Rossiyskoy Federatsii" (National Anthem of the Russian Federation)
lyrics/music: Sergey Vladimirovich MIKHALKOV/Aleksandr Vasilyevich ALEKSANDROV
note: in 2000, Russia adopted the tune of the anthem of the former Soviet Union (composed in 1939); the lyrics, also adopted in 2000, were written by the same person who authored the Soviet lyrics in 1943
National heritage
total World Heritage Sites: 31 (20 cultural, 11 natural)
selected World Heritage Site locales: Kremlin and Red Square, Moscow (c); Historic Saint Petersburg (c); Novodevichy Convent (c); Historic Monuments of Novgorod (c); Trinity Sergius Lavra in Sergiev Posad (c); Volcanoes of Kamchatka (n); Lake Baikal (n); Central Sikhote-Alin (n); Historic Derbent (c); Kazan Kremlin (c)
Military and Security
Military and security forces
Armed Forces of the Russian Federation: Ground Troops (Sukhoputnyye Voyskia, SV), Navy (Voyenno-Morskoy Flot, VMF), Aerospace Forces (Vozdushno-Kosmicheskiye Sily, VKS); Airborne Troops (Vozdushno-Desantnyye Voyska, VDV), and Missile Troops of Strategic Purpose (Raketnyye Voyska Strategicheskogo Naznacheniya, RVSN) referred to commonly as Strategic Rocket Forces, are independent "combat arms," not subordinate to any of the three branches
Federal National Guard Troops Service of the Russian Federation (FSVNG, National Guard, Russian Guard, or Rosgvardiya)
Federal Security Services (FSB): Federal Border Guard Service (includes land and maritime forces) (2023)
note 1: the Air Force and Aerospace Defense Forces were merged into the VKS in 2015; VKS responsibilities also include launching military and dualâuse satellites, maintaining military satellites, and monitoring and defending against space threats
note 2: the Ministry of Internal Affairs, Federal Security Service, Investigative Committee, Office of the Prosecutor General, and National Guard are responsible for law enforcement; the Federal Security Service is responsible for state security, counterintelligence, and counterterrorism, as well as for fighting organized crime and corruption; the national police force, under the Ministry of Internal Affairs, is responsible for combating all crime
note 3: the National Guard was created in 2016 as an independent agency for internal/regime security, combating terrorism and narcotics trafficking, protecting important state facilities and government personnel, and supporting border security; it also participates in armed defense of the countryâs territory in coordination with the Armed Forces; forces under the National Guard include the Special Purpose Mobile Units (OMON), Special Rapid Response Detachment (SOBR), and Interior Troops (VV); these troops were originally under the command of the Interior Ministry (MVD); also nominally under the National Guardâs command are the forces of Chechen Republic head Ramzan KADYROV
Military expenditures
5% of GDP (2023 est.)
4% of GDP (2022 est.)
4% of GDP (2021 est.)
4% of GDP (2020 est.)
3.8% of GDP (2019 est.)
comparison ranking : 9
Military and security service personnel strengths
prior to Russia's full-scale invasion of Ukraine in February 2022, approximately 900,000 active-duty troops (350,000 Ground Troops; 40,000 Airborne Troops; 150,000 Navy; 160,000 Aerospace Forces; 70,000 Strategic Rocket Forces; approximately 20,000 special operations forces; approximately 100,000 other uniformed personnel (command and control, cyber, support, logistics, security, etc.); estimated 350,000-plus Federal National Guard Troops (2023)
note 1: in December 2022, the Russian Government announced a target level of 1.15 million total troops and subsequently announced further plans to expand the size of the armed forces to 1.5 million by 2026
Military equipment inventories and acquisitions
the Russian Federation's military and paramilitary services are equipped with domestically produced weapons systems, although in recent years Russia has imported considerable amounts of military hardware from external suppliers such as Iran and North Korea; the Russian defense industry is capable of designing, developing, and producing a full range of advanced air, land, missile, and naval systems; Russia is the world's second largest exporter of military hardware (2023)
Military service age and obligation
18-27 years of age for compulsory service for men; 18-40 for voluntary/contractual service; women and non-Russian citizens (18-30) may volunteer; men are registered for the draft at 17 years of age; 12-month service obligation (Russia offers the option of serving on a 24-month contract instead of completing a 12-month conscription period); reserve obligation for non-officers to age 50 (Russian men who have completed their compulsory service to re-enter the army up to the age of 55); enrollment in military schools from the age of 16 (2023)
note 1: in May 2022, Russia's parliament approved a law removing the upper age limit for contractual service in the military; in November 2022, President Vladimir PUTIN signed a decree allowing dual-national Russians and those with permanent residency status in foreign countries to be drafted into the army for military service
note 2: the Russian military takes on about 260,000 conscripts each year in two semi-annual drafts (Spring and Fall); as of 2021, conscripts comprised an estimated 30% of the Russian military's active duty personnel and most reserve personnel were former conscripts; in April of 2019, the Russian Government pledged its intent to end conscription as part of a decade-long effort to shift from a large, conscript-based military to a smaller, more professional force; an existing law allows for a 21-month alternative civil service for conscripts in hospitals, nursing homes and other facilities for those who view military duty as incompatible with their beliefs, but military conscription offices reportedly often broadly ignore requests for such service
note 3: as of 2020, women made up about 5% of the active-duty military
note 4: since 2015, foreigners 18-30 with a good command of Russian have been allowed to join the military on 5-year contracts and become eligible for Russian citizenship after serving 3 years; in October 2022, the Interior Ministry opened up recruitment centers for foreigners to sign a 1-year service contract with the armed forces, other troops, or military formations participating in the invasion of Ukraine with the promise of simplifying the process of obtaining Russian citizenship
Military deployments
information varies and may not reflect troops transferred to support Russian military operations in Ukraine; approximately 3,000 Armenia; up to 5,000 Belarus; up to 10,000 Georgia; approximately 500 Kyrgyzstan; approximately 1,500 Moldova (Transnistria); estimated 2,000-5,000 Syria; approximately 3-5,000 Tajikistan (2023)
note 1: in February 2022, Russia invaded Ukraine with an estimated 150,000 troops, some of which were staged out of Belarus; prior to the invasion, it maintained an estimated 30,000 troops in areas of Ukraine occupied since 2014; in 2024, the Russian Government claimed to have nearly 700,000 troops in the occupied portions of Ukraine
note 2: as of 2023, Russia was assessed to have thousands private military contractors conducting military and security operations in Africa and the Middle East, including in Burkina Faso, the Central African Republic, Libya, Mali, Niger, Sudan, and Syria
Military - note
the Russian military is a mixed force of conscripts and professionals (contract servicemen) that is capable of conducting the full range of air, land, maritime, and strategic missile operations; it is also active in the areas of cyber warfare, electronic warfare, and space; in addition to protecting Russiaâs sovereignty and territorial integrity, the military supports Moscowâs national security objectives, which include maintaining and projecting influence and power outside Russia, particularly in the former Soviet republics, and deterring perceived external threats from the US and NATO
in recent years, the Russian military has conducted combat operations in both Ukraine and Syria; in February 2022, Russia launched an unprovoked full-scale invasion of Ukraine, and the military continues to be heavily engaged there in what is the largest war in Europe since World War II ended in 1945; Russia has occupied Ukraineâs province of Crimea and backed separatist forces in the Donbas region of Ukraine since 2014 with arms, equipment, and training, as well as special operations forces and troops, although Moscow denied their presence prior to 2022; Russia intervened in the Syrian civil war at the request of the ASAD government in September 2015 in what was Moscowâs first overseas expeditionary operation since the Soviet era; Russian assistance has included air support, arms and equipment, intelligence, military advisors, private military contractors, special operations forces, and training
prior to its military operations in Syria and Ukraine, Russia seized the Georgian regions of Abkhazia and South Ossetia by force in 2008 (2023)
Space
Space agency/agencies
State Space Corporation of the Russian Federation (Roscosmos); Roscosmos was established in 2015 from a merger of the Federal Space Agency and the state-owned United Rocket and Space Corporation; began as the Russian Space Agency (RSA or RKA) in 1992 and restructured in 1999 and 2004 as the Russian Aviation and Space Agency and then the Federal Space Agency); the Russian Space Forces (Kosmicheskie voyska Rossii, KV) are part of the Russian Aerospace Forces (Vozdushno-Kosmicheskiye Sily, VKS) (2024)
note: Russiaâs space strategy is defined jointly by Roscosmos and the Ministry of Defense; prior to the breakup of the Soviet Union in 1991, the USSRâs space program was dispersed amongst several civil and military organizations
Space launch site(s)
Baikonur Cosmodrome (Kazakhstan); Vostochny Cosmodrome (Amur Oblast); Plesetsk Cosmodrome (Arkhangel'sk Oblast); Kapustin Yar (Astrakhan Oblast); Yasny Launch Base (Orenburg Oblast) (2024)
note 1: the Baikonur cosmodrome and the surrounding area are leased and administered by Russia until 2050 for approximately $115 million/year; the cosmodrome was originally built by the Soviet Union in the mid-1950s and is the site of the World's first successful satellite launch (Sputnik) in 1957; it is also the largest space launch facility in the World, comprising 15 launch pads for space launch vehicles, four launch pads for testing intercontinental ballistic missiles, more than 10 assembly and test facilities, and other infrastructureÂ
note 2: in 2018, Kazakhstan and Russia agreed that Kazakhstan would build, maintain, and operate a new space launch facility (Baiterek) at the Baikonur space center (estimated to be ready for operations in 2025)
Space program overview
has one of the worldâs largest space programs and is active across all areas of the space sector; builds, launches, and operates rockets/space launch vehicles (SLVs), satellites, space stations, interplanetary probes, and manned, robotic, and re-usable spacecraft; has astronaut (cosmonaut) training program and conducts human space flight; researching and developing a broad range of other space-related technologies; participates in international space programs such as the International Space Station (ISS); prior to Russiaâs 2022 full-scale invasion of Ukraine, Russia had relations with dozens of foreign space agencies and commercial entities, including those of China, the European Space Agency (ESA), India, Japan, and the US; Roscosmos and its public subsidiaries comprise the majority of the Russian space industry; Roscosmos has eight operating areas, including manned space flights, launch systems, unmanned spacecraft, rocket propulsion, military missiles, space avionics, special military space systems, and flight control systems; private companies are also involved in a range of space systems, including satellites, telecommunications, remote-sensing, and geo-spatial services (2024)
note: further details about the key activities, programs, and milestones of the countryâs space program, as well as government spending estimates on the space sector, appear in the Space Programs reference guide
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https://www.bloomberg.com/news/articles/2023-08-02/wall-street-traders-made-ruble-rub-usd-fortune-via-kazakhstan-armenia
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Wall Street Traders Made Russian Ruble (RUB/USD) Fortune Via Kazakhstan, Armenia
|
[] |
[] |
[] |
[
"Wall Street",
"Currency Trading",
"Russia",
"Economic Sanctions",
"Kazakhstan",
"Armenia",
"GOLDMAN SACHS GROUP INC",
"CITIGROUP INC",
"Exchange Rate",
"War",
"markets",
"business"
] | null |
[
"Donal Griffin",
"Nariman Gizitdinov",
"William Shaw"
] |
2023-08-02T00:00:00
|
Wall Street chiefs seeking to explain recent steep drops in trading revenue have reminded investors how lucrative things were a year ago: Goldman Sachs Group Inc. President John Waldron called 2022 “particularly strong.” Citigroup Inc. boss Jane Fraser said “everything was firing on all cylinders.”
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Bloomberg.com
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https://www.bloomberg.com/news/articles/2023-08-02/wall-street-traders-made-ruble-rub-usd-fortune-via-kazakhstan-armenia
|
Wall Street chiefs seeking to explain recent steep drops in trading revenue have reminded investors how lucrative things were a year ago: Goldman Sachs Group Inc. President John Waldron called 2022 “particularly strong.” Citigroup Inc. boss Jane Fraser said “everything was firing on all cylinders.”
Rarely mentioned is one of the reasons for last year’s boom: a billion-dollar windfall funneled from Russia through former Soviet republics to Wall Street’s currency traders.
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https://www.geeksforgeeks.org/currency-of-russia-russian-ruble/
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en
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Russian Ruble - GeeksforGeeks
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2023-09-22T03:50:25
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A Computer Science portal for geeks. It contains well written, well thought and well explained computer science and programming articles, quizzes and practice/competitive programming/company interview Questions.
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en
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GeeksforGeeks
|
https://www.geeksforgeeks.org/currency-of-russia-russian-ruble/
|
The Russian ruble is the currency of Russia. The ruble has served as the currency of the Russian Empire and the Soviet Union before that. The moniker “ruble” is currently formally used in only three countries: Russia, Belarus, and Transnistria. As of April 2019, the ruble is the world’s 17th most traded and free-floating currency.
What is the RUB (Russian Ruble)?
The ruble is the official currency of Russia. There are only two other currencies older than the ruble, and both are still in use. There are 100 kopeks in each unit. The ruble is the currency of the Russian Federation. It is second only to the British pound in terms of the world’s oldest currency, in use since the 13th century. Russia’s ruble fluctuates in value in tandem with global oil prices due to the country’s status as a major producer and exporter of both.1 Russian ruble value is around 0.017 United States dollars. In India, the Russian ruble value is around 1.30 Indian Rupee (as of May 2022).
History of the Russian Ruble:
Russia’s currency, the ruble, has been in use since the 13th century and has undergone numerous changes, including revaluations and devaluations. Before the dissolution of the Soviet Union in 1992, the currency’s symbol was SUR, and it remained RUR until the redenomination of 1998. After the redenomination in 1998, one new ruble was equivalent to 1000 old rubles. The Russian ruble’s exchange rate has generally measured global commodity prices in recent years, particularly the price of oil. In the second half of 2014, the ruble lost more than half of its value against the dollar as oil prices fell worldwide. Sanctions have been imposed in the form of money and other resources.
The Economy of Russia:
Russia is larger than the 48 contiguous states of the United States combined, and it is endowed with an abundance of natural resources. Russia’s GDP ranked 11th in the world in 2020, but it was only 7 percent of the size of the US economy. This is due to Russia’s heavy reliance on natural resource exports rather than higher-value-added industries. Russia’s GDP lags far behind that of countries of a similar size, such as Italy and France. The ongoing political tensions in Russia, combined with sanctions imposed by the international community, have had a negative impact on the country’s economy following the beginning of Russia’s invasion of Ukraine in February 2022. The value of the ruble and many Russian companies both began to decline.
Conclusion:
During both the Russian Empire and the Soviet Union, the ruble served as the country’s currency (the Soviet ruble). The Russian ruble is used informally as well. Russia, Belarus, and Transnistria are the only three countries that use the same currency. Many of Ukraine’s seized regions, the Crimean Peninsula, Donetsk, and Luhansk PPR, as well as the Georgian regions of Abkhazia and South Ossetia, use Russian rubles informally. With the ruble trading at a free-floating rate in April 2019, the Russian ruble value has become the world’s seventeenth most widely used currency.
|
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9245
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dbpedia
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3
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https://wise.com/us/currency-converter/rub-to-gbp-rate
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en
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Russian rubles to British pounds sterling Exchange Rate. Convert RUB/GBP
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[] | null |
Convert RUB to GBP with the Wise Currency Converter. Analyze historical currency charts or live Russian ruble / British pound sterling rates and get free rate alerts directly to your email.
|
en
|
Wise
|
https://wise.com/us/currency-converter/rub-to-gbp-rate
|
Waiting on a better rate?
Set an alert now, and we’ll tell you when it gets better. And with our daily summaries, you’ll never miss out on the latest news.
Daily updates
Receive daily email about the RUB → GBP exchange rate
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1 RUB to GBP stats
The performance of RUB to GBP in the last 30 days saw a 30 day high of 0.0092 and a 30 day low of 0.0085. This means the 30 day average was 0.0089. The change for RUB to GBP was -2.42.
The performance of RUB to GBP in the last 90 days saw a 90 day high of 0.0094 and a 90 day low of 0.0085. This means the 90 day average was 0.0089. The change for RUB to GBP was -1.56.
Track market rates
Beware of bad exchange rates. Banks and traditional providers often have extra costs, which they pass to you by marking up the exchange rate. Our smart tech means we’re more efficient – which means you get a great rate. Every time.
|
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9245
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3
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https://academic.oup.com/book/46112/chapter/404653722
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[
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] | null |
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9245
|
dbpedia
|
0
| 31
|
https://www.makemytrip.com/tripmoney/currency/russian-ruble
|
en
|
MakeMyTrip
|
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[
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9245
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dbpedia
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3
| 64
|
https://www.nytimes.com/2023/08/10/business/russia-economy-ruble-inflation.html
|
en
|
Russia Tries to Bolster Ruble as Inflation Adds to Economic Woes
|
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[
"Paul Sonne"
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2023-08-10T00:00:00
|
The central bank in Moscow took steps to counter the currency’s slide, but the war and resulting sanctions have put intense pressure on the economy.
|
en
|
/vi-assets/static-assets/favicon-d2483f10ef688e6f89e23806b9700298.ico
|
https://www.nytimes.com/2023/08/10/business/russia-economy-ruble-inflation.html
|
After Russia’s ruble hit a 16-month low against the U.S. dollar, raising fears of rising inflation, even one of President Vladimir V. Putin’s top cheerleaders in state media lashed out at the country’s financial authorities on Thursday over an exchange rate that he said was a subject of global mockery.
The Russian central bank took measures on Thursday to stabilize the currency, amid the latest squall of financial volatility unleashed by Mr. Putin’s war against Ukraine. This time, the challenges are seen in both a struggling ruble that is fueling inflation, but also in government budget deficits that raise concerns about the sustainability of Russia’s intense spending on the war.
The weakening ruble neared an exchange rate of 100 per U.S. dollar earlier this week, down by roughly 25 percent since the start of the year. The decline prompted the Bank of Russia on Thursday to halt purchases of foreign currency for the remainder of the year “to reduce volatility.”
The central bank’s move should help shore up the ruble, because when the bank spends rubles to buy foreign currency, it increases the supply of rubles in circulation, lowering their value. The ruble was roughly flat in trading on Thursday.
But the events demonstrate how Russia’s dramatically changing economy is challenging Moscow’s financial policymakers, who have nimbly reacted to wartime shocks but still face longer-term dilemmas. Yawning deficits, coupled with exports that are increasingly crimped by sanctions, have disrupted Russia’s economic equilibrium.
The central bank has forecast inflation between 5 and 6.5 percent this year. Official data released on Wednesday showed the annual rate of inflation accelerating to 4.3 percent in July.
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9245
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https://www.thefederalist.eu/site/index.php/en/viewpoints/2305-the-rouble-the-transferable-rouble-the-ecu-and-the-international-monetary-system
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en
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The Rouble, the Transferable Rouble, the Ecu and the International Monetary System
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The Federalist - A political review
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en
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Viewpoints
Year XXXI, 1989, Number 3, Page 223
THE ROUBLE, THE TRANSFERABLE ROUBLE, THE ECU AND THE INTERNATIONAL MONETARY SYSTEM*
DMITRY SMYSLOV
The Soviet Union’s new foreign economic strategy is becoming a significant factor in international economic relations and will exert a favourable influence on them.
Till the 1970s economic relations between the Soviet Union and capitalist countries, and between East and West were, on the whole, fairly restricted. Subsequently, however, considerable progress was made. As well as growing trade, the Soviet Union and other communist countries began to carry out active operations in the international credit and monetary markets, expanding, for example, the network of their banks abroad.
In spite of these innovations (compensation agreements, project financing), the Soviet Union’s foreign economic relations were basically restricted to traditional forms, such as trade transactions and their crediting, at least until the mid-eighties. Even more significantly the Soviet Union was not a full partner in the world economic system. It was not a member of the international economic and monetary institutions. Together with its communist partners, the Soviet Union adhered to the principle: “two worlds – two markets – two monetary systems”.
The isolation of the Soviet Union and other communist countries from the international economic, monetary and financial system was conditioned by two basic circumstances. Although reflecting the existence of a political division of the world into two blocs, with its acute confrontation between East and West, nevertheless a naïve belief persisted that this would help to protect the Soviet economy against what the Soviet Union called “market chaos”. However, in the absence of efficient interaction with the world market, a growing technological gap developed accompanied by a decline in competitiveness and a deterioration in the quality of commodities produced. Public opinion in the Soviet Union began to show great concern over this state of affairs.
The process of perestroika, initiated by the 27th Party Congress, includes foreign trade. The Congress expressed the conviction that a growing trend towards the interdependence of states within the world community is a vital characteristic of current growth. As a result of this process, “a controversial but interdependent and in many ways integrated world is taking shape”.[1] All this requires a new type of thinking from us all, a certain re-evaluation of approaches by both the East and West vis-à-vis the most important international economic problems.
The new approach which has been adopted by the Soviet leadership towards foreign economic relations is apparent in two main areas. Firstly, there is a keen desire to use new and very radical forms and methods in the organization of economic relations in order to intensify the Soviet Union’s participation in the international division of labour. Hence, different forms of international production, scientific and technological co-operation are being organized.
Secondly, the Soviet Union and other communist countries are taking steps to ensure their gradual integration into the institutional structure of world economic relations. The Soviet Union’s desire to expand international economic co-operation was apparent in the positive position taken vis-à-vis GATT, ultimately designed to ensure the USSR’s full membership in this organization. The question of potential forms of co-operation with the International Monetary Fund or entering this organization is now being actively discussed in the Soviet Union. The need to form an international monetary system, in which all the countries in the world could participate without detriment to their interests is becoming increasingly evident.
The following three problems stand out: the reconstruction of the monetary and financial machinery of the Soviet Union, the evolution of the CMEA’s monetary system and opportunities for interaction with the European monetary system, and, finally, the prospects for improvement in the world’s monetary systems.
Overhauling the machinery of monetary and financial relations.
The reconstruction of the Soviet monetary and financial machinery is designed to achieve co-ordination between monetary and credit relations and goals of domestic economic policy, an increase in the role of these relations within the entire complex of foreign economic relations, the growth of stability and, at the same time, flexibility of monetary and financial machinery. Ultimately, the question comes down to ensuring that the Soviet system is no longer excluded from world monetary relations and establishing a new model guaranteeing its interaction with the world monetary system.
One suggestion is the idea of opening up the Soviet economy to the world market, forcing foreign trade to become the main force in promoting the economic progress of the Soviet Union but this suggestion is ill-founded. Foreign economic relations must be as efficient as possible and must make a maximum contribution towards economic growth. However, domestic resources and stimuli remain the only basis for this growth.
Overhauling the national monetary machinery presupposes, above all, the establishment of an economically based rouble exchange rate and the introduction of its convertibility.
The consensus in favour of establishing a more correct exchange rate for the rouble in combination with the introduction of some form of convertibility is growing stronger. There is a growing belief that such an exchange rate should not be a remote goal, but a concrete means to solve current and specific economic problems. A flexible exchange rate policy is needed which could take all changes in the economic situation into account.
It is quite evident that a new exchange rate for the rouble would reflect a true correlation of prices in the Soviet Union and abroad to a much greater extent. In this connection, attempts are being made to calculate a “real” exchange rate for the rouble by using a comparison of domestic and world prices, on as broad a commodity basis as possible. There is no doubt that such calculations could serve as useful reference points. However, in the current climate, price ratios cannot be accepted as the only deciding factor for what the exchange rate should be. In addition, such calculations will only be suitable if they are based on prices which emerge after the imminent reform of pricing and the creation of an efficient system of wholesale trade. However, we need the influence of the rouble exchange rate on the economy today, because it could, to a certain extent, favour economic reforms and improve economic machinery. Finally, an exchange rate based on purchasing power would evidently require a market test. In what way could such a test be carried out? Here the question of the rouble’s exchange rate brings us to the second most important question — the problem of its convertibility.
The resolutions passed in June 1987 Plenum of the CPSU Central Committee made provisions for a step-by-step development towards the rouble’s convertibility as a basic feature of economic reform, and one that was to be carried out within the framework of the CMEA.[2] Opinions differ as regards the terms and methods to achieve this goal. Some economists favour an immediate introduction of full rouble convertibility, whilst others argue that it could only be fulfilled after the completion of the reconstruction of the entire economic system and a basic improvement in the technology used in industry permitting the Soviet Union to achieve a world level of competitiveness. Clearly, these conditions are essential if full rouble convertibility is to be introduced. Yet intermediate measures in this direction are necessary even now. A step-by-step introduction of convertibility is necessary if a more efficient participation of the Soviet Union in the international division of labour is to be achieved and production and foreign economic relations are to be stimulated and developed.
As for the methods of introducing the convertibility, a certain consensus of ideas is being formed, based on the fact that, in certain aspects, the Western method which means a transition from external to internal convertibility, cannot be used. The Soviet Union is conditioned by both concrete circumstances relating to insufficient currency reserves and considerations of a more general character — a special role for the state and currency regulation arising from the specific nature of the socialist economy. Therefore, the first stage must relate to a limited convertibility for the rouble, primarily for residents.
The “internal” convertibility of the Soviet rouble presupposes the formation of a closed currency market for a particular, gradually expanding circle of enterprises, other organizations and banks. A relatively free trade in foreign currencies will be realized in such a market according to different modalities. In the end, this would lead to a formation of an interbank market. The internal monetary market controlled by the state would encourage greater independence for enterprises, an optimal redistribution and use of currency resources.
The internal monetary market should lead to the emergence of a fluctuating exchange rate for the rouble. This exchange rate alone would serve as an objective criterion by which to introduce a new official exchange rate by the USSR’s state bank. The Gosbank could use different means by which to influence the rouble’s market exchange rates and their gradual rapprochement with official ones. In the presence of a real and flexible exchange rate for the rouble, together with an improvement in the Soviet economy, it would be possible to make a gradual transition in the future from a free circulation of foreign currencies inside the country to a circulation of Soviet roubles in the world markets, to their use in international payments, i.e. the introduction of full scale rouble convertibility.
In scientific discussions and economic literature there are more radical proposals concerning the formation and introduction of a new monetary unit (some authors call it tchervonets in analogy with the 1920s) which in principle would be a free convertible exchange rate from the outset.
While illustrating the issue of the reform of the exchange rate system for the Soviet rouble and the introduction of its convertibility, I would like to emphasize that at present the approach of the Soviet economists towards this problem is subordinated to the country’s domestic economic interests. The international aspect of the problem is given a peripheral position. It follows from what has been stated above that in the foreseeable future no progress should be expected as regards the Soviet rouble’s transformation into an international reserve currency. However, a collective currency unit for the communist countries could under certain conditions aspire to such a role.
The transferable rouble and the ECU: opportunities for interaction.
At present, in both Eastern and Western Europe, the idea of developing the “Common European House” is gaining ground. The signing of the joint Declaration to establish official relations between both European integrated groupings — CMEA and EEC — in June, 1988, after prolonged negotiations will no doubt stimulate this. Multilateral expansion of economic co-operation between the CMEA and the EEC should become the basis for the “Common European House”. It is quite evident that the relations between the two currency systems should not be excluded from this process.
The basis of the currency system in the communist countries, in contrast to currency systems in the West, is not so much dependent on their belonging to a particular geographical region, but rather their membership of a social system existing in the countries belonging to this system. Hence, the need for these countries to co-operate mutually in a particularly intense way.
The transferable rouble established in 1964 constitutes the main link in the currency and financial system of the CMEA member-states. In the “Complex programme” of socialist economic integration (1971), it is defined as the international collective currency for the CMEA member states and is intended to function as a measure of value and means of payment and accumulation. The circulation of transferable roubles is handled by the International Economic Co-operation Bank (IECB) either through payments for commodities and services or through crediting. The transferable rouble has its own quotation vis-à-vis foreign currencies which differs from the Soviet rouble.
The entire turnover of commodities and services between the CMEA member-states uses transferable roubles. Every country has an account in the IECB in transferable roubles for transactions with other countries, and payments are made through that account. Theoretically, sums may be put into this account by certain countries, but they may be used to make payments to other countries. Thus, the introduction of the transferable rouble was considered, in contrast to the former bilateral clearing system, as a realization of the principle of the multilateral balance of payments. If necessary, the IECB gives credits in transferable roubles to balance these payments.
The “Complex programme” of communist economic integration made provisions for a number of measures to perfect the currency system of the CMEA member-states. In this connection, the following was stated: “The collective currency (transferable rouble), together with the growth of its role, can be potentially used for payments with third countries and occupy the place corresponding to the role and importance of the CMEA member-states in the world economy among other currencies serving international transactions”.[3] In addition, there was a provision for the transferable rouble’s convertibility into the national currencies of the CMEA member-states and also mutual convertibility of the CMEA national currencies.
Experience has demonstrated the usefulness of the transferable rouble system. During the 17 years it has been used in payments of the CMEA member-states, the annual amount of mutual payments increased from 22.9 billion transferable roubles in 1964 to 122.9 billion transferable roubles in 1980, i.e., 5.4 fold.[4]
However, so far the CMEA member-states have not, unfortunately, been able to advance in the direction of achieving the goals set at the beginning of the 1970s to any considerable extent. This engendered a certain dissatisfaction with the transferable rouble and some criticism. It should be pointed out that prices in transferable roubles are an average of world market prices as expressed in the national currencies of Western countries and therefore, such a currency unit cannot be a true measure of value. It is also not a means of multilateral payment because trade between the CMEA member-states is still predominantly on a bilateral basis. In the present conditions, the transferable rouble is virtually just a calculation unit.
At present, the socialist economic integration system is in the process of reconstruction. In particular, a new drive in the process of perfecting the system of monetary, financial and credit relations within the CMEA was imparted by the Moscow meeting of the leaders of the brother parties of the socialist countries, who were the members of the Council, in November 1986, and by the 43rd (extraordinary) session of the CMEA held in Moscow in October, 1987. The organizing member-states embarked on the course towards a creation of the necessary conditions for a further consolidation and development of the collective currency — the transferable rouble — in their payments. In addition, the use of national currencies by a group of countries, as an experiment in payment for commodities and services was also planned. These currencies were to be used to finance common productions and joint ventures. An agreement was achieved by a majority of countries on the introduction of mutual convertibility of national currencies and the transferable rouble with the purpose of raising the efficiency of the currency and financial system.
The intention is now to study the practical problems relating to a gradual introduction of convertibility of the transferable rouble into free convertible currencies. Of course, this is not a task for the present time. A sharp rise in product quality, considerable growth and improvements in the export figure and structure of the CMEA member-states is needed to solve this problem.
Admittedly, the process of rebuilding the CMEA’s monetary and financial system is not proceeding as smoothly as it should. It has now become clear that the transferable rouble cannot fulfil its monetary functions efficiently without profound transformations in the economic systems of the CMEA member-states, the introduction of genuine independence and self-repayment of enterprises, a radical reform in pricing, major changes in the form of mutual economic co-operation and the creation of a single fully-fledged market for the communist countries. Under such conditions, the most significant steps are now being made through bilateral relations. The USSR has concluded agreements with Bulgaria, Czechoslovakia and Mongolia on the mutual use of national currencies with regard to direct common productions and joint ventures. The problem of paying mutual transactions with convertible currencies is being studied.
Active co-operation on a bilateral basis should favour an improvement and consolidation of the centralized monetary and financial system of the CMEA member-states, but under certain circumstances it can also engender centrifugal trends within this system. However, communist economic integration (as well as the Western European integration) needs the existence of a collective currency and a multilateral payments system.
The CMEA and the EEC are natural economic partners. However, the need to organize co-operation between them is not only related to their belonging to the same continent. It is also defined by the fact that both are experiencing a period of profound structural change. The progress in trade and economic relations between the CMEA and the EEC member-states requires an intensification of their mutual monetary and financial relations.
Favourable premises for establishing co-operation between the currency systems of the CMEA and the EEC are being formed thanks to the presence of a certain similarity or closeness in their distinctive features. There is evident symmetry in the institutional structures in both currency groupings: in the CMEA — International Economic Co-operation Bank — and in the EEC — European Monetary Co-operation Fund. Both were given certain features of a central bank. Banking institutions intended for the financing of economic development on a medium-and long-term basis were also formed in both the CMEA and in the EEC. Finally, there are multilateral clearing systems in both groupings.
Collective currency units of both monetary systems — the transferable rouble and the ECU — owe their origin to real assets: in the first instance, commodities and services realized in the market, and in the second instance, centralized gold and dollar reserves. Attention is rightly being paid to the considerable coincidence between the composition of the “currency basket” of ECU and the set of currencies which are used in the mutual trade between the countries belonging to the two European groupings. The value correlations between the transferable rouble and the ECU are liable to undergo considerably fewer fluctuations than, for example, the exchange rate of the ECU in relation to the dollar. It makes both collective currencies comparatively convenient means to be used in mutual settlements.
The problem of possible forms of interaction between the transferable rouble and the ECU has been broadly and thoroughly investigated by the Italian economist, A. Jozzo.[5] I would like to endorse some considerations expressed by him on that count.
There are possibilities of using the ECU in transactions by central and other banks of the CMEA member-states, and those of the ICEB, in particular, owing to the fact that this currency unit was first used in private commercial and financial transactions in the West. Furthermore, it should be stated that for a long time now, the ICEB has had relations and makes transactions in free convertible currencies on deposits, current accounts, and credits with a great number of banks in capitalist countries, including many of the largest financial institutions in Western Europe. The banks of the CMEA member-states and the ICEB could acquire assets, together with the national currencies of Western countries, whilst the ECU, received as payment for exports, supplies the value which would be expressed in this currency unit.
The central banks of the CMEA member-states and the ICEB have the opportunity to ask the ECCF to grant them the status of “third party” ECU holders, as provided for in the agreement on the European Currency system (ECS). By receiving “official ECUs” from the central banks of the CMEA member-states, which have divisions in the EEC member-states, they could join the Banking Association on ECU which includes over 80 banks acting within the EEC and also the Bank for International Settlements which ensures a clearing system for transactions in the ECU. If it were demonstrated that those banks met certain accepted criteria then they could become participants in the clearing system. Such a possible course of events derives from the fact that this system has been recently expanded to the banks of non-EEC member countries.
What, then, are the probable ways in which the transferable rouble will be used in mutual settlements between the EEC member-states and the CMEA member-states and IECB? Evidently, here too, a situation is conceivable whereby Western European banks would have the opportunity to acquire credits in transferable roubles and use them at their discretion for the payment of imports from any CMEA member-state or for other purposes. The countries belonging to the EEC could ultimately become full members of the IECB, the possibility of which is provided for in its charter. The development of such processes could lead to the introduction of certain forms of convertibility of the transferable rouble into the ECU. The second logical step is the definition of the exchange rate between these two currency units.
The conditions for interaction of the transferable rouble and the ECU should evidently become the subject of an official agreement between the two organizations. Such an agreement would, in particular, regulate the method of intervention in the monetary market with a view to maintaining a fixed exchange rate between the transferable rouble and ECU. This does not preclude the possibility for the CMEA and, hence, the EEC member-states of establishing independent contract relations with the central agencies and joint financial institutions of the other integration organization. It is certainly intended that such relations would not conflict with aims and principles collectively agreed upon between the member-states of each organization.
Achieving stable monetary and financial relations between Eastern and Western Europe will undoubtedly stimulate trade and other forms of economic co-operation between them. At the same time, these interrelations would serve as an important link in the world currency system.
Ways of improving the international monetary system.
Evidently, the time has come when the communist countries can no longer allow themselves to be excluded from the process of implementing the international monetary system they profit by. Obviously, together with the greater involvement of communist countries in world economic relations and changes in the world economic system (fluctuation of prices, interests rates, exchange rates) the functioning of this system will exert an increasing influence on such countries, which will affect their economic interests in a very direct way.
And so what monetary system should we strive to adopt? What are the goals in this field, towards which East and West could both work?
It goes without saying that the monetary system based on the dollar primarily meets the interests of the USA. Clearly, this system gives them the opportunity to finance their internal and external expenditure extensively through external sources. However, this type of financing cannot mean anything except a transfer of value from abroad that is an appropriation of a part of the national product of other countries without any equivalent. It is no coincidence that J. Rueff, the eminent Western economist, asserted in his time that such a practice “allows, the United States to live at the account of their suppliers”.[6] In such a context, the foreign dollar accumulations constitute a real debt of the USA in relation to the rest of the world.
The increase of dollar liquidity abroad serves as an approximate appraisal of the size of the “contribution” collected by the USA from other countries. During the period between 1970 and 1986 total debts to government agencies of other countries, obligations of American banks to foreign private depositors and investments of the latter in American Treasury securities increased by an average $40.1 billion dollars annually. This corresponds to 1.7 per cent of the annual level of GDP in the USA (in current prices) for the same period. If, in addition, we take into account an inflow of foreign private short-term capital into the USA, omitted in the statistics (its size is basically defined in the item “statistical discrepancies” in the balance of payments) then the result would be increased to 2.2 per cent of average GDP.[7]
The United States unique position means that it does not experience the difficulties which other countries would meet in a similar situation. They are spared the need to keep their external settlements in balance or, in other words, they have the privilege that they can maintain “le déficit sans pleurs” as J. Rueff neatly put it.[8] Therefore, the international monetary system based on the “dollar standard” ensures significant unilateral advantages for the USA at the expense of other countries. This raises the question of its reform and democratization.
What alternatives are there to the “dollar standard” system? Two practical options can be named. The former is the transition to a system of international settlements, based on the use of a universal collective reserve currency unit, whilst the latter is the consolidation of currency polycentrism, i.e. the formation of separate regional currency groupings which would be formed on the basis of either collective or national currencies.
Progress towards the internationalization of the official reserve system, i.e. a change of the world monetary system from the gold-dollar standard to a collective currency standard is related primarily to the name of R. Triffin,[9] who developed the ideas J.M. Keynes expressed during the Second World War. According to this line of thought the International Monetary Fund (or any other institution which would replace it) should be given the functions of a central bank, regulating the amount and composition of liquid reserves and acting as an international clearing house simultaneously. At the end of the 1960s such an approach led to the establishment of the “Special Drawing Rights” system (SDR).
The trend towards the gradual creation of a universal international currency is prompted by a process of internationalization of production and circulation. The international nature of world economic relations is in conflict with the national character of reserve currencies now serving such relations. This can be explained by the fact that the world community has not yet the maturity, either in a political or in a social and psychological sense, requested to introduce an international payment system which would demand the use of the collective reserve and of the payment means common to all countries.
What has been mentioned above clarifies the fact that the reconstruction of the world monetary system is being predominantly achieved under present conditions through its diversification, that is, through the formation and consolidation of separate currency groupings narrowing the sphere of the dollar circulation to a certain extent. They are based either on the fact that member-states belong to the same geographical region or on the community of the socio-economic system existing in these countries. The formation of such groupings also reflects an unevenness in the economic and political development of the modern world, and the existing contradictions between the interests of separate centres of economic power.
The dollar zone — i.e. the group of countries “pegging” their monetary units to the American currency — remains an important element within the international monetary system. The Japanese yen zone, which is in the process of internationalization, is gradually crystallizing in South-East Asia. The yen’s share of official currency reserves increased from 3.3 per cent in 1978 to 6.9 per cent in 1986.[10] The European monetary system is the most institutionalized within Western currency groupings. A number of Western economists hold the view expressed, in particular, by Professor A. Giovannini, of Columbia University, USA, in a conversation with me that the realization of the “Europe 1992” project, the formation of an entirely integrated internal market within the EEC, would require the unification of the tax systems of the member-states, the formation of a Western European central bank and a common monetary unit. The currency system of the CMEA member-states is one of the currency poles in the contemporary world. It unites a group of socially similar countries.
Under present conditions, it is becoming increasingly necessary to settle the relations between individual currency groupings and to stabilize mutual exchange rates of the currency units which belong to such groupings. The regulation of the machinery necessary for this purpose could evidently become a subject for special international agreements.
Conceivably, the very concept of a collective currency unit is being tested or “run in” at the level of integrational currency formations. In my view, the logic of an internationalization of economics ultimately undermines opportunities for the functioning of national currencies as a global currency. In this context, the appearance of such views is not accidental, such as those stated by R. Cooper, (Harvard University, USA), who considers the creation of the universal monetary unit not only for international settlements, but internal circulation too, to be necessary.[11]
The current monetary system needs a more stable and reliable “anchor” than the dollar which is liable to attacks of inflation inside the country and sharp exchange rate fluctuations in international markets. Furthermore, considerations on a possible “pegging” of the SDR value unit to a certain “commodity basket” are being advanced. The growth of the role of SDRs could evidently be favoured by their use as international payment means, by a guarantee of their “recognition” by participants in the market as a competitive and reliable means of investment of free money reserves — for example, Professor P. Kenen from Princeton University (USA) advanced such a proposal.[12] Thus, it is believed that the need for a transition to the international monetary unit would reveal itself in one way or another.
The reform of the international monetary system is undoubtedly a complicated affair. Rapid progress could be hardly expected in this sphere. Active participation by the communist countries in this process would favour the formation of a monetary system which would adequately reflect the entire multi-coloured palette of the contemporary world. At the same time it would serve as a significant factor in improving the international political climate and in enhancing confidence between countries in the East and West.
* This heading includes interventions which the editorial board believes readers will find interesting, but which do not necessarily reflect the board’s views.
[1] Materialy XXVII syezda Communisticheskoy partii Sovetskogo Soyuza, Moscow, Politizdat, 1986, pp. 20-21.
[2] Materialy Plenuma Centralnogo Comiteta CPSS, June 25-26, 1987, Moscow, Politizdat, 1987, p. 101.
[3] Complexnaya programma dalneyshego uglubleniya y sovershenstvovaniya sotrudnichestva y razvitiya socialisticheskoy economicheskoy intergratsii stranchelov SEV, Moscow, Politizdat, 1971, pp. 50-51.
[4] Kommunist, No. 15, 1980, p. 104; Vneshnyaya torgolya, No. 8, 1981, p. 46.
[5] A. Jozzo, “ECU and Rouble: Towards a New International Monetary Order”, in The Federalist, XXX (1988), pp. 6-17.
[6] J. Rueff, Le péché monétaire de l’Occident, Paris, 1971, p. 264.
[7] Calculated according to Survey of Current Business, Washington, D.C., June, 1986, pp. 42-43; March, 1987, p. 44; Economic Report of the President, Washington, D.C., 1987, p. 244.
[8] J. Rueff, op.cit., p. 23.
[9] Triffin’s views are expounded, in particular, in his following recent publications: R. Triffin, “The Paper - Exchange Standard: 1971-1977” in: P. A. Volcker, R. C. Btyant, L. Gleske et al., International Monetary Co-operation: Essays in Honour of Henry C. Wallich. Essays in International Finance, No. 169, Princeton University, New Jersey, 1987, pp. 70-85; R. Triffin, “W.M.S: The World Monetary System… or Scandal?”, in The Future of the International Monetary System. Round Table Conference, August 28-29, 1986, Castle Szirak, Hungary. Edited by M Szabo-Pelsoczi. Preface by Robert Triffin. The Institute for World Economics of the Hungarian Academy of Sciences, Budapest, 1988, pp. 69-90.
[10] International Monetary Fund. Annual Report 1987. Washington, D.C., 1987, p. 60.
[11] R.N. Cooper, The International Monetary System. Essays in World Economics. The MIT Press, Cambridge, Massachusetts, 1987, pp. 239-278.
[12] P.B. Kenen, “Use of the SDR to Supplement or Substitute for Other Means of Finance”, in International Money and Credit: The Policy Roles. Edited by George M. von Furstenberg, Washington, International Monetary Fund, pp. 327-360.
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Russia and China have been teaming up to reduce reliance on the dollar. Here's how it's going.
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2023-02-22T17:06:01+00:00
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Squeezed by sanctions, Russia has turned to Chinese yuan and gold, but both introduced new vulnerabilities and inconveniences.
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Atlantic Council
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https://www.atlanticcouncil.org/blogs/new-atlanticist/russia-and-china-have-been-teaming-up-to-reduce-reliance-on-the-dollar-heres-how-its-going/
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Just days before Russia’s brutal invasion of Ukraine began in 2022, we warned that Russia and China’s collaboration on dedollarization—the process of reducing an economy’s reliance on the US dollar for international trade and finance—would not sanction-proof Russia’s economy. And it did not. As a result of unprecedented Western sanctions, Moscow overnight became unable to transact in dollars and euros—the world’s dominant currencies.
Russia has since pursued alternatives to manage its trade and reserves. Chinese yuan and gold became the stars of the show, but both introduced new vulnerabilities and inconveniences. Yuan makes Russia dependent on Beijing’s goodwill, while gold is not as sanctions-proof as Moscow expected, and Russia has had a hard time scaling up its illicit gold trade.
Yuanization creates new vulnerabilities
In February 2022, heavily sanctioned and isolated, Russia had to find an alternative to dollar-denominated transactions. The new currency needed two characteristics: It had to be relatively stable and minted by a non-sanctioning country. Of the few eligible options, such as the Indian rupee and South African rand, China’s yuan was the only one actively seeking an international role and able to take it on.
Moscow has rapidly intensified its use of yuan in two main ways: increasing the yuan’s share in Russia’s reserves and switching to direct ruble-yuan trade instead of using the dollar as an intermediary. At the end of last year, Russia’s Finance Ministry increased the permitted share of yuan reserves in the National Wealth Fund to 60 percent. Meanwhile, ruble-yuan trade increased eighty-fold from February to October 2022. With each of these actions, Russia created new vulnerabilities and cemented itself as the little brother in the relationship.
Ruble-yuan exchange rate vulnerability. China is Russia’s top trade partner, and its tight control of the yuan-ruble exchange rate creates risks for Russia’s balance of trade. A tightly controlled yuan may inherently seem more stable than a floating dollar, but Chinese authorities have managed the ruble-yuan exchange rate to its advantage before. Specifically, shortly after the invasion began, the Chinese government relaxed yuan controls to allow the rapidly depreciating ruble to fall faster, thus avoiding subsidizing Chinese goods for Russians by giving them more yuan than their rubles were really worth. As a result, it became much more expensive for Russia to buy Chinese goods. In other words, China could choose at any time—for political reasons or otherwise—to make Chinese imports really expensive and Russian exports to China much cheaper.
Chinese bond liquidation risk. The Russian Central Bank might not be able to sell Chinese bonds and convert the proceeds to rubles if Beijing decides to impose restrictions on yuan outflows. The liquidity risk of Chinese bonds is one of the main reasons why central banks around the world avoid purchasing them. In March 2022, the Russian Central Bank and National Wealth Fund were estimated to own 140 billion dollars’ worth of yuan-denominated assets, money that could be not be obtained by Moscow if Beijing decides to impose capital controls.
Currency swap lines elimination risk. Russia is vulnerable to Beijing’s political will when it comes to currency swap lines—an agreement between two central banks to exchange currencies. Moscow has used bilateral swap lines with the Chinese Central Bank to build up its yuan reserves. In 2014, Russia made a three-year currency swap deal worth 150 billion yuan and renewed it for another three years in 2017. In January, the Russian and Chinese central banks agreed to set up a new yuan currency swap instrument. However, such agreements expose Chinese financial institutions to US secondary sanctions for helping Russia’s sanctions evasion efforts. If Beijing determines that the threat of secondary sanctions is becoming substantial, it will soon abandon the swap lines with Russia.
Last year saw Russia take the first major steps toward the yuanization of its economy, a necessity for Moscow that in turn is increasing Beijing’s clout in international finance. While the yuan helped Russia weather the effects of sanctions in the short term, it also opened a Pandora’s box of new vulnerabilities for Moscow. For as long as sanctions remain in place, Russia will have to stay on the right side of Beijing.
Is Russia turning to gold-digging?
Moscow has been looking for alternatives to the euro and dollar since its first invasion of Ukraine in 2014. Its gold holdings, for example, have nearly tripled since 2014. Moscow is currently sitting on 150,000 gold bars valued at about $140 billion, mostly stacked in Russian vaults out of reach of Western asset freezes.
Russia is also the world’s second largest gold producer, and miners are keen to sell excess gold in international markets. Beijing has been an enthusiastic buyer. Russia is reportedly selling gold to China at a discount of up to 30 percent, and gold transfers from Russia to China increased by 67 percent in 2022.
Nevertheless, we haven’t so far observed a global mass sell-off of Russian reserve gold for four reasons.
Legal trade of Russian gold has been mostly blocked off.
Illicitly transporting 150,000 gold bars is a logistical nightmare.
Moscow has not yet felt an intense need for financing due to its energy export windfall in 2022.
Most critically, Russia will struggle to find willing and able partners to scale this illicit trade. Fellow sanctioned countries, the likes of Iran, Venezuela, and Myanmar, are deprived of dollars and euros themselves. Other gold hubs such as China, India, and the United Arab Emirates (UAE) are not interested in mass purchases due to the heightened risk of exposure and Western retaliation.
Formal channels cut off. The London Bullion Market Association’s decision to suspend all Russian refineries from its accredited list in March 2022 and a gold import ban by Group of Seven (G7) countries in June 2022 meant that Russian gold’s traditional sales routes to the United States and Europe were cut off. Russia also cannot use gold as collateral for loans or for location swaps—a transaction in which two parties agree to exchange gold they have in different locations without physically moving the gold. But no one would want to swap their non-sanctioned gold with sanctioned Russian gold. Moscow has hence turned to illicit means to liquidate its gold.
Illicit channels are also challenging. Gold’s physical nature can make it a hassle-ridden financial asset since transporting gold is more difficult than digital assets. But its advantage is its ability to be moved outside of electronic financial networks. Russia could use gold to bypass sanctions by partnering with non-Western gold hubs including China, the UAE, and India in exchange for cash or barter. Refineries are permitted to list intermediary countries as the source of unrefined gold, meaning its Russian origin is fairly easy to mask. While refined gold is inscribed with the refinery’s name and date, making it readily identifiable as Russian, it can be remelted and then resold as anything-but-Russian gold.
Recent history is replete with precedents for gold smuggling by sanctioned economies. In 2019, Russia reportedly flew Venezuelan gold around the world and exchanged it for cash dollars which were then flown back to Caracas. In 2012, Iran sold natural gas to Turkey in exchange for gold, which was then sold for cash in Dubai.
Potential partners will remain hesitant to trade a sanctioned asset in large quantities unless the risk of exposure is alleviated. But as illicit trade of other commodities between Russia and non-Western countries expands, Russian President Vladimir Putin’s shadow fleet of ships grows, and networks become entrenched, risks could be managed and more gold could clandestinely start flowing with it.
China’s global yuanization ambition
Russia and China have partnered in dedollarization since 2014. But Russia’s invasion of Ukraine and the resulting Western sanctions have created an imbalance in the urgency for dedollarization.
In addition to increasing its yuan reserves and eliminating the dollar intermediary in yuan-ruble exchange, Moscow is planning its own international standard for gold and other precious metals where prices will be fixed to members’ national currencies, likely including the yuan.
China is all too happy to assist Russia in this process. Beijing has a longer-term goal of competing with the dollar and of advancing the yuan as an international currency. Russia will be a test case as the first large economy to embrace the yuan in this way. With the power dynamic in the relationship strongly tilted in China’s favor, Russia’s urgency will permit the People’s Bank of China to experiment with financial and monetary policies in a controlled environment while easing the yuan into a more international role.
Maia Nikoladze is an assistant director for economic statecraft at the Atlantic Council’s GeoEconomics Center. Follow her on Twitter @Mai_Nikoladze.
Mrugank Bhusari is an assistant director with the GeoEconomics Center focusing on international finance and global governance. Follow him on Twitter @BhusariMrugank.
Further reading
Thu, Jun 30, 2022
Why Russia’s economy is more resilient than you might think
New Atlanticist By Josh Lipsky
With each recession, Russian institutions—and the population itself—have become increasingly inured to economic trauma.
Thu, Sep 22, 2022
The dollar has some would-be rivals. Meet the challengers.
New Atlanticist By Ananya Kumar, Josh Lipsky
What are the realistic alternatives to the dollar that US and allied policymakers should be paying attention to? And how can they respond?
Fri, Feb 18, 2022
Russia and China: Partners in Dedollarization
Econographics By Mrugank Bhusari, Maia Nikoladze
Russia has virtually stopped receiving Dollars for its exports to China. Does the US have reason to be concerned?
Image: Russian President Vladimir Putin speaks with Chinese President Xi Jinping before an extended-format meeting of heads of the Shanghai Cooperation Organization summit (SCO) member states in Samarkand, Uzbekistan September 16, 2022. Sputnik/Sergey Bobylev/Pool via REUTERS
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https://kids.kiddle.co/Russian_ruble
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Russian ruble facts for kids
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Learn Russian ruble facts for kids
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https://kids.kiddle.co/Russian_ruble
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The Russian ruble or rouble (Russian: рубль rublʹ, plural: рубли́ rubli; sign: ₽, руб; code: RUB) is the currency of Russia. It is also used in two partially recognized countries, Abkhazia and South Ossetia. It is also used in the unrecognised republics of Donetsk and Luhansk. One ruble is subdivided into 100 kopeks (Russian: копе́йка kopeyka, plural: копе́йки kopeyki).
The ruble was the currency of the Russian Empire and of the Soviet Union (as the Soviet ruble). Only three countries, Russia, Belarus and Transnistria use currencies known as ruble. The ruble was the world's first decimal currency: it was decimalised in 1704 when the ruble became equal to 100 kopeks.
In 1992 the Soviet ruble (code: SUR) was replaced with the Russian ruble (code: RUR) at the rate 1 SUR = 1 RUR. In 1998, while Russia was suffering from a second economic crisis, the Russian ruble was redenominated with the new code "RUB" and was exchanged at the rate of 1 RUB = 1,000 RUR.
Images for kids
The "ruble" symbol used throughout the 17th century, composed of the Russian letters "Р" and "У".
See also
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https://apnews.com/article/why-is-ruble-falling-ee777eeaf897d42befae052336fc35d5
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Russia’s ruble has tumbled. What does it mean for the wartime economy?
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2023-08-15T13:12:53+00:00
|
The Russian ruble has fallen a long way in recent months, and the country's central bank is stepping in to halt the slide.
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en
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/apple-touch-icon.png
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AP News
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https://apnews.com/article/why-is-ruble-falling-ee777eeaf897d42befae052336fc35d5
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Russia’s ruble has fallen a long way in recent months, and the country’s central bank has stepped in to try to halt the slide.
Until now, the government stood aside as the declining ruble helped its budget. But a weaker currency also poses the threat of higher prices for everyday people in Russia — and the government has finally moved to halt the drop.
Here are key things to know:
WHY IS THE RUBLE FALLING?
Russia is selling less abroad — mainly reflected in falling revenue from oil and natural gas — and it’s importing more. People or companies importing goods to Russia means selling rubles for foreign currency like dollars or euros. That lowers the ruble’s exchange rate.
Russia’s trade surplus — meaning it sells more goods than it buys — has shrunk. Previously, Russia saw a large trade surplus — which typically supports a country’s currency — because of high oil prices and plummeting imports after invading Ukraine.
But oil prices have dipped this year, and it’s more cumbersome for Russia to sell its oil due to Western sanctions, including price caps on crude and oil products like diesel.
Meanwhile, imports have started to recover after nearly a year and a half of war as Russians find ways around sanctions. Some trade has been rerouted to Asian countries that are not participating in sanctions. And importers have found ways to ship goods through nearby countries such as Armenia, Georgia and Kazakhstan.
At the same time, Russia has ramped up defense spending, pumping money into companies that make weapons, for instance. Companies must import parts and raw materials, while some government money winds up in the pockets of workers who buy imported goods.
That government spending, along with the willingness of India and China to buy Russia oil, is helping the economy perform better than many had expected. The International Monetary Fund said last month that it expects Russia’s economy to grow 1.5% this year.
WHY DID THE CENTRAL BANK RAISE INTEREST RATES?
To fight inflation, first of all.
A weaker ruble worsens inflation by making imports more expensive in Russian currency. And the ruble’s weakness is increasingly being passed through to prices people pay. Inflation hit 7.6% over the past three months.
Higher interest rates will make it more expensive to get credit, and that should limit domestic demand for goods — including imports. So the central bank is trying to cool off the domestic economy to lower inflation.
It raised its key interest rate from 8.5% to 12% at an emergency meeting Tuesday after the ruble’s fall was criticized by a Kremlin economic adviser.
DOES THIS MEAN SANCTIONS ARE WORKING?
Sanctions are having an impact even if they are not collapsing the economy. Exports — and thus the ruble — have fallen because Western allies have boycotted Russian oil and imposed a price cap on oil exports to non-Western nations. The sanctions prevent insurers or shippers who are mainly based in the West from handling Russian oil above $60 a barrel.
The cap and boycott have forced Russia to sell at a discount and take expensive steps such as obtaining a fleet of ghost tankers that are beyond the reach of sanctions.
However, higher oil prices have recently sent the cost of Moscow’s supplies above the price cap, the International Energy Agency said in an August report.
Oil revenue fell 23% in the first half of this year but Russia still earned $425 million a day from oil sales, according to the Kyiv School of Economics.
The rebound in imports shows that Russia is finding ways around sanctions and boycotts. It’s expensive and cumbersome, but if someone needs an iPhone or a Western-made car, they can get it.
IS RUSSIA HAVING AN ECONOMIC CRISIS?
No, says Chris Weafer, CEO of Macro-Advisory Ltd. “The lower ruble is partly a reflection of the effect of sanctions, but it doesn’t indicate an underlying economic crisis.”
The falling ruble actually has helped the government with its budget. It means more rubles for every dollar of earnings from oil and other products Russia sells. That bolsters spending on the military and on social programs aimed at blunting the impact of sanctions on the Russian people.
“They’ve tried to compensate for the drop in the dollar value of oil receipts with the weaker ruble, so that therefore the deficit in terms of spending could be contained and more manageable,” Weafer said.
Amid sanctions and restrictions on moving money out of the country, the ruble exchange rate is largely in the hands of the central bank, Weafer said. It can tell major exporters when to exchange their dollar earnings into Russian currency.
“The weakness was planned, but it’s overdone and they want to pull it back,” Weafer said.
Janis Kluge, a Russian economy expert at the German Institute for International and Security Affairs, said the ruble decline is “not very welcome” to the Kremlin.
While not a full-blown crisis, “this is the closest we came to a real economic problem since the start of the war,” Kluge said.
The chaos at the start of sanctions was far worse, but since then, the ruble decline “is the first time that something seems to be not so much under control,” he said.
Any boost to the budget from a lower ruble, he said, is offset by higher spending on government wages and pensions, which are indexed to the inflation caused by the lower ruble.
“Whatever gives the impression of a weak or unstable economy is not welcomed by the Russian government,” he said. “In Russia, the exchange rate is always seen as the most important indicator of the health of the economy.”
WHAT DOES THIS MEAN FOR RUSSIANS?
Inflation caused by ruble devaluation hits low-income people hard because they spend more on necessities like food.
While higher interest rates will dampen economic growth, relieving some pressure on prices, the government is unlikely to back off on military spending.
“So it’s a clear prioritization of the government of this war over the welfare of households,” Kluge said.
Foreign travel — enjoyed mostly by a minority in big cities like Moscow and St. Petersburg — gets much more expensive with a weaker ruble.
“The instability of the national currency always has a not so good impact,” said Dina Solovyova, 51, a veterinarian. “Most likely, this will affect ordinary people, because the rise in prices for everything will surely follow. We’ll wait and see.”
Nikolay Rubtsov, a 20-year-old student, indicated he wasn’t much disturbed by the ruble’s fall.
“This is all temporary. I think everything will be back to normal soon. I don’t think it can last long,” Rubtsov said in Moscow.
___
This story was first published Aug. 15, 2023. It was updated on Aug. 31, 2023, to correct the name of Chris Weafer’s firm. It is Macro-Advisory Ltd, not Macro Advisory Partners.
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https://www.pbs.org/newshour/world/russias-central-bank-raises-interest-rates-in-bid-to-stabilize-ruble
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Russia’s central bank raises interest rates in bid to stabilize ruble
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2023-08-15T10:38:59-04:00
|
The Russian currency passed 101 rubles to the dollar Monday, hitting the lowest level in almost 17 months.
|
en
|
PBS News
|
https://www.pbs.org/newshour/world/russias-central-bank-raises-interest-rates-in-bid-to-stabilize-ruble
|
TALLINN, Estonia (AP) — Russia’s central bank made a big interest rate hike Tuesday, an emergency move designed to fight inflation and strengthen the ruble after the country’s currency reached its lowest value since early in the war with Ukraine.
READ MORE: Russia says it will pay foreign debt in rubles after ban from U.S. banks
The ruble has lost more than a third of its value since the beginning of the year as Moscow increases military spending and Western sanctions weigh on its income from energy shipments. The flagging currency does not mean the Russian economy is in freefall — though it is facing challenges, including rising prices for households and businesses, according to analysts who study Russia.
A lower exchange rate allows Moscow to transfer the dollars it earns from selling oil and natural gas into more rubles to pay pensions and run government agencies. But the drop in value went a bit too far, and officials are now tightening it up, analysts say.
While over time sanctions will erode long-term economic growth, the recently weaker ruble “does not imply an underlying economic crisis, it doesn’t suggest Russia is about to fall off a cliff,” said Chris Weafer, CEO of Macro-Advisory Partners.
The central bank hiked its key rate 3.5 percentage points to 12% after announcing a meeting of its board of directors a day earlier as the ruble declined.
The Russian currency passed 101 rubles to the dollar Monday, hitting the lowest level in almost 17 months. The ruble strengthened after the rate hike announcement but has since given up some of those gains to hit about 98 to the dollar.
The central bank says demand for goods has exceeded the country’s ability to expand output, increasing inflation and affecting “the ruble’s exchange rate dynamics through elevated demand for imports.”
READ MORE: Russia demands natural gas payments in rubles, leaves a loophole
Until now, the ruble’s decline suited the government because it increased the amount of rubles for each dollar of oil revenue, helping the Kremlin maintain spending on the military and social programs, Weafer said.
The government and the central bank have been able to manage the ruble’s decline by telling energy exporters when to exchange their dollar earnings. “It is an entirely managed currency,” Weafer said.
That intentional devaluation now “appears to be overdone. I think this is now the message from the central bank — the weakness was planned, but it’s overdone and they want to pull it back,” he said.
Sergei Guriev, provost and professor of economics at the Sciences Po institute of political studies in Paris, also said “there is no disaster” despite Russia’s economy having “big problems” — such as the decrease in oil and gas revenue, capital fleeing the country, a budget deficit and the weaker ruble.
It was “politically important” for the Russian authorities to have the national currency at less than 100 rubles to the dollar, so once the ruble crossed that sensitive threshold this week, the central bank took action, Guriev said.
A weaker ruble benefits the government but also means “higher costs for households and for certain parts of the Russian war machine,” Guriev said.
“If you need to buy (weapon) components in Iran or circumvent sanctions through third countries, you need foreign currency,” Guriev said. “That’s why you have the budget deficit.”
The rate hike came after President Vladimir Putin’s economic adviser, Maksim Oreshkin, on Monday blamed the weak ruble on “loose monetary policy” in an op-ed, saying the central bank has “all the tools necessary” to stabilize the situation and that he expects normalization shortly.
READ MORE: As ruble rebounds, some question impact of sanctions against Russia
By raising borrowing costs, the central bank is trying to fight price spikes as Russia imports more and exports less, especially oil and natural gas, with defense spending going up and sanctions taking a toll. Importing more and exporting less means a smaller trade surplus, which typically weighs on a country’s currency.
Inflation reached 7.6% over the past three months, the central bank said. It also hiked rates 1 percentage point last month, saying inflation was expected to keep rising and the fall in the ruble is adding to the risk. Its next meeting is planned for Sept. 15.
After Western countries imposed sanctions on Russia over the invasion of Ukraine in February 2022, the ruble plunged as low as 130 to the dollar, but the central bank raised its key interest rate to as high as 20% in the days afterward and enacted capital controls that stabilized the currency’s value. It later began cutting rates.
McHugh reported from Frankfurt, Germany.
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https://www.globocambio.co/en/currencies-of-the-world/russian-ruble
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Russian Ruble
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en
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https://www.globocambio.co/documents/20151/31618/favicon.png/54a53a66-bc81-dbec-5206-5cee30bb0cd9?t=1667562804900
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https://www.globocambio.co/es/monedas-del-mundo/rublo-ruso
|
The rouble became the currency of Russia 500 years ago and it is subdivided into 100 kopeks.
Origins and history
The origins of the rouble date back to 1704, when Peter the Great standardised this coin to 28 grams of silver. On 17th December 1885 a new standard that did not change the silver rouble but reduced the gold content to 1161 grams was adopted.
Later on, during the reign of Nicholas I, the silver rouble was declared as monetary unit and main instrument of payment. Banknotes, on the other hand, were to become a supporting instrument of payment.
Despite the reforms, innovations and trials undergone by the rouble, the currency did not lose value until the Russian Revolution in 1917.
During the dissolution of the Soviet Union in 1991, the Russian currency experienced a modification in its design. At this time, the Central Bank of the Soviet Union (Gosbank) put in circulation new banknotes and coins, which were also issued by the Russian Bank in 1992. That very same year, the Bank of Russia issued its first series of Russian rouble banknotes with a nominal value of 5,000 and 10,000 roubles.
In 1993 there was a new reform that, along with the new banknotes issued, would put a stop to the circulation of soviet models.
In March 2014 the Russian rouble was introduced into the Republic of Crimea and the federal city of Sevastopol, after their annexation to the Russian Federation.
Current Russian rouble banknotes and coins
Today, banknotes in denominations of 5, 10, 50, 100, 500, 1000 and 5000 Russian roubles are in circulation.
Regarding coins, denominations of 1, 5, 10 and 50 kopeks, and 1, 2, 5 and 10 roubles are in use.
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The primary objectives of the Central Bank are to ensure price stability and financial stability.
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/_layouts/images/favicon.ico
| null |
ABOUT THE CBA
History
Money circulation in Soviet period
In 1924, the coins were put into circulation in the territory of the Soviet Union. These were of 1, 2, 3 and 5 kopeck denomination in copper; 10, 15, 20 kopeck in base-alloy silver; and 50 kopeck and 1 ruble in silver. Copper coin of the smallest nominal value, the half-kopeck, was issued in 1925-1928.
Starting from 1926, the coins of 1, 2, 3 and 5 kopeck denomination were made of bronze; starting from 1931, the coins of 10, 15 and 20 kopeck denomination were made of copper-nickel alloy.
There were various issues of the USSR banknotes. They originated in 1923 and followed one another in a short period. Both monetary units “ruble” and “chervonets” (1 chervonets was worth 10 ruble) were issued and put into circulation. In 1937, on the occasion of the 20th anniversary of October revolution, for the first time V. Lenin was portrayed on the series of chervonets.
A monetary reform was passed in 1947 with a key objective to promote a quick recovery of the war-suffered economy, and a new series of banknotes of 1, 3, 5, 10, 25, 50 and 100 ruble denomination was issued.
Pic. 1. USSR, banknote of 5 ruble denomination, 1947
In 1961 denomination of currency was implemented (proportion 10:1), and a new series of coins of 1, 2, 3, 5, 10, 15, 20, 50 kopeck and 1 ruble denomination was put into circulation. The series of banknotes consisted of 1, 3, 5, 10, 25, 50 and 100 ruble denomination.
Pic. 2. USSR, banknote of 3 ruble denomination, 1961
Pic. 3. USSR, banknote of 25 ruble denomination, 1961
In 1991, to regulate money circulation, the banknotes of 50 and 100 ruble denomination were withdrawn from circulation and substituted by new ones. Later on, the banknotes of the 1991 series in nominal value 1, 3, 5, 10, 200, 500 and 1000 ruble were put into circulation.
Since January 1992, prices were liberalized, which led to price increases and devaluation of the ruble. The banknotes of 1992 series of 50, 200, 500, 1000, 5000 and 10000 ruble denomination were put into circulation.
More information related to the materials of this Section can be found from literature available in the Library of the Central Bank of Armenia:
Y. T. Nercessian, Bank Notes of Armenia, Armenian Numismatic Society, Los Angeles, 1988
П.Ф. Рябченко, Полный каталог бумажных денежных знаков и бон России, СССР, стран СНГ (1769-1994 гг.), Издательско-культурологический центр “София”, Киев, 1995
R. Vardanyan, G. Mughalyan, A. Vardanyan, A. Zohrabyan, H. Hovhannisyan, The History of Money Circulation of Armenia, Central Bank of the Republic of Armenia, Yerevan, 2018
А. Р. Тевотросян, Бумажные денежные знаки Армении, Авторское издание, Ереван, 2020
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https://support.microsoft.com/en-us/topic/support-for-the-new-russian-ruble-symbol-25b7c7df-ea17-4c1e-aefd-158f2cafbc89
|
en
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Support for the new Russian Ruble symbol
|
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Read about the update to Windows that helps support the new ruble and how you can use this update in Office.
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/apple-touch-icon.png
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https://support.microsoft.com/en-us/topic/support-for-the-new-russian-ruble-symbol-25b7c7df-ea17-4c1e-aefd-158f2cafbc89
|
If you are looking for support for the new ruble currency symbol, you're in luck. Because of an update to Windows 8.1, Windows RT 8.1, Windows Server 2012 R2, Windows 8, Windows RT, and Windows Server 2012, you can now input, view, print, and use the new symbol as the default symbol for data formatted as Russian currency. More information about the update.
Note: Support has ended for Windows XP so no update is available for Windows XP.
Typing the ruble symbol
If you don’t have a keyboard that supports the ruble symbol, you can insert the ruble currency symbol using one of these:
Using Alt-X: Type 20BD, and then hold down the ALT key and press X. (Supported by OneNote, and Outlook using Word as the editor, and Word.)
Important: Some of the Office applications, like PowerPoint, can't convert Unicode codes to characters. If you need a Unicode character and are using one of the programs that doesn't support Unicode characters, use the Character Map to enter the characters you need.
Insert Symbol: Click Insert > Symbol. (Supported by Excel, InfoPath, OneNote, Outlook using Word as editor, PowerPoint, Publisher, SharePoint Designer, and Word.)
Tips:
If the symbol you want to insert isn't in the list, click More Symbols. In the Font box, click the font you want, click the symbol you want to insert, and then click Insert.
If you are using an expanded font, like Arial or Times New Roman, the Subset list appears. Use this list to choose from an extended list of language characters, including Greek and Russian (Cyrillic), if available.
Printing the ruble symbol
If your printer doesn't have the new ruble currency symbol in any of its resident fonts, a box is printed instead of the ruble currency symbol. Contact your printer vendor to find out how to get updated printer fonts that include the new ruble currency symbol. You can also adjust your printer setup to not use resident fonts. Look for an option called Print fonts as graphics in printer setup properties.
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https://www.globalexchange.com.jm/en/currencies-of-the-world/russian-ruble
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en
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Russian Ruble
|
https://www.globalexchange.com.jm/documents/20151/31618/favicon.png/54a53a66-bc81-dbec-5206-5cee30bb0cd9?t=1667562804900
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en
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https://www.globalexchange.com.jm/documents/20151/31618/favicon.png/54a53a66-bc81-dbec-5206-5cee30bb0cd9?t=1667562804900
|
https://www.globalexchange.com.jm/es/monedas-del-mundo/rublo-ruso
|
The rouble became the currency of Russia 500 years ago and it is subdivided into 100 kopeks.
Origins and history
The origins of the rouble date back to 1704, when Peter the Great standardised this coin to 28 grams of silver. On 17th December 1885 a new standard that did not change the silver rouble but reduced the gold content to 1161 grams was adopted.
Later on, during the reign of Nicholas I, the silver rouble was declared as monetary unit and main instrument of payment. Banknotes, on the other hand, were to become a supporting instrument of payment.
Despite the reforms, innovations and trials undergone by the rouble, the currency did not lose value until the Russian Revolution in 1917.
During the dissolution of the Soviet Union in 1991, the Russian currency experienced a modification in its design. At this time, the Central Bank of the Soviet Union (Gosbank) put in circulation new banknotes and coins, which were also issued by the Russian Bank in 1992. That very same year, the Bank of Russia issued its first series of Russian rouble banknotes with a nominal value of 5,000 and 10,000 roubles.
In 1993 there was a new reform that, along with the new banknotes issued, would put a stop to the circulation of soviet models.
In March 2014 the Russian rouble was introduced into the Republic of Crimea and the federal city of Sevastopol, after their annexation to the Russian Federation.
Current Russian rouble banknotes and coins
Today, banknotes in denominations of 5, 10, 50, 100, 500, 1000 and 5000 Russian roubles are in circulation.
Regarding coins, denominations of 1, 5, 10 and 50 kopeks, and 1, 2, 5 and 10 roubles are in use.
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https://www.globalexchange.com.jm/en/currencies-of-the-world/russian-ruble
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en
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Russian Ruble
|
https://www.globalexchange.com.jm/documents/20151/31618/favicon.png/54a53a66-bc81-dbec-5206-5cee30bb0cd9?t=1667562804900
|
https://www.globalexchange.com.jm/documents/20151/31618/favicon.png/54a53a66-bc81-dbec-5206-5cee30bb0cd9?t=1667562804900
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[] | null |
en
|
https://www.globalexchange.com.jm/documents/20151/31618/favicon.png/54a53a66-bc81-dbec-5206-5cee30bb0cd9?t=1667562804900
|
https://www.globalexchange.com.jm/es/monedas-del-mundo/rublo-ruso
|
The rouble became the currency of Russia 500 years ago and it is subdivided into 100 kopeks.
Origins and history
The origins of the rouble date back to 1704, when Peter the Great standardised this coin to 28 grams of silver. On 17th December 1885 a new standard that did not change the silver rouble but reduced the gold content to 1161 grams was adopted.
Later on, during the reign of Nicholas I, the silver rouble was declared as monetary unit and main instrument of payment. Banknotes, on the other hand, were to become a supporting instrument of payment.
Despite the reforms, innovations and trials undergone by the rouble, the currency did not lose value until the Russian Revolution in 1917.
During the dissolution of the Soviet Union in 1991, the Russian currency experienced a modification in its design. At this time, the Central Bank of the Soviet Union (Gosbank) put in circulation new banknotes and coins, which were also issued by the Russian Bank in 1992. That very same year, the Bank of Russia issued its first series of Russian rouble banknotes with a nominal value of 5,000 and 10,000 roubles.
In 1993 there was a new reform that, along with the new banknotes issued, would put a stop to the circulation of soviet models.
In March 2014 the Russian rouble was introduced into the Republic of Crimea and the federal city of Sevastopol, after their annexation to the Russian Federation.
Current Russian rouble banknotes and coins
Today, banknotes in denominations of 5, 10, 50, 100, 500, 1000 and 5000 Russian roubles are in circulation.
Regarding coins, denominations of 1, 5, 10 and 50 kopeks, and 1, 2, 5 and 10 roubles are in use.
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https://fortune.com/europe/2023/10/12/russian-rouble-surge-putin-capital-control-foreign-currency-revenue/
|
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Russian ruble surges after Putin ordered 43 companies to prop up the slumping currency by selling some of their foreign cash
|
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[] |
[] |
[
""
] | null |
[
"Prarthana Prakash",
"Ryan Hogg",
"Chris Morris",
"Orianna Rosa Royle",
"Phil Wahba",
"Sydney Lake"
] |
2023-10-12T00:00:00
|
The Russian central bank endorsed the move to save the ruble and improve liquidity after months of pushback against President Putin's capital controls.
|
en
|
/icons/favicons/favicon.ico
|
Fortune Europe
|
https://fortune.com/europe/2023/10/12/russian-rouble-surge-putin-capital-control-foreign-currency-revenue/
|
The Bank of Russia has endorsed the move, according to Reuters, after months of pushing back and favoring instead the adoption of higher interest rates to curb the ruble’s devaluation. It said the measures could prop up the fluctuating currency and improve liquidity.
Putin signed a decree Wednesday meant for Russian export companies—43 of them in total across energy, agriculture, and other sectors—to sell some of their foreign currency revenues on domestic markets in exchange for rubles to help bolster Russia’s currency.
“The main purpose of these measures is to create long-term conditions for increasing the transparency and predictability of the currency market, [and] to reduce the opportunity for currency speculation,” the Russian First Deputy Prime Minister Andrei Belousov said in a statement, CNN reported.
The move has helped the ruble inch up against the U.S. dollar by roughly 4%, hitting a two-week high. But the currency remains significantly lower—about 23% down this year.
The ruble trouble started shortly after Russia invaded Ukraine last February, which prompting a slew of Western sanctions ultimately resulting in an all-time low of 120 rubles against the U.S. dollar. At that time, the Kremlin also introduced capital controls, making exporters exchange at least 80% of foreign currency revenues in the form of U.S. dollars, euros or other currencies, for roubles. Three months later, the threshold was dropped to 50% before it was scratched altogether.
Russia policymakers have been on edge as the currency neared the psychological threshold of 100 rubles to a dollar last week. The ruble actually crossed that barrier in August, sparking an emergency central bank meeting, a series of rate hikes amounting to 550 basis points, and a decision to halt foreign currency purchases on the domestic markets over the following months.
Despite the Kremlin’s efforts to shore up the ruble, the currency continues to remain under pressure due to capital outflows and poor exports. Putin has acknowledged the pressures amid soaring inflation.
But some experts see this measure as a possible path to the ruble regaining some of its strength relative to the dollar.
“If the parameters of our export goods remain the same…some more strengthening is possible,” Herman Gerf, CEO of Russian lender Sberbank said, according to TASS news agency, Reuters reported. “The regular, fundamental exchange rate today is 85–90 per dollar.”
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9245
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dbpedia
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2
| 97
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https://www.rbth.com/history/333072-us-dollars-soviet-union
|
en
|
Was it illegal to own U.S. dollars in the Soviet Union?
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[] |
[
""
] | null |
[
"Yekaterina Sinelschikova"
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2024-08-19T19:50:59+03:00
|
As far as the Soviet authorities were concerned, the U.S. dollar was the epitome of capitalism. That is why for a Soviet person, getting hold of a...
|
en
|
/favicon.ico
|
Russia Beyond
|
https://www.rbth.com/history/333072-us-dollars-soviet-union
|
The Soviet people were very much familiar with the dollar sign - it could often be found in Soviet magazines in cartoons ridiculing the West, the “capitalist enemy”. But did they know exactly what a dollar bill looked like? Most of them and for a very long time, did not. Simply because prior to the collapse of the USSR, many people had never held dollars in their hands (there were even cases when fraudsters sold red dollar notes on the black market, assuring buyers that red dollars had a better exchange rate abroad).
There were very strict rules in the USSR for buying any foreign currency. A violation of these rules could result in severe punishment, up to execution.
General rules
Firstly, the state had a monopoly on all foreign exchange transactions. There were no currency exchange booths in the underpasses or on the main tourist routes.
Secondly, an ordinary Soviet person dealt exclusively with the ruble. It was only if the authorities allowed them a short-term trip abroad that they could exchange rubles for a foreign currency. Foreign exchange transactions could be carried out only at a branch of ‘Vneshtorgbank’ (the USSR’s bank for foreign trade) and only before noon. Customers were allowed to enter the bank in small groups and, at the entrance, two policemen checked if they had permission to travel abroad.
Upon returning to the Soviet Union (having listed all one’s foreign currency in a customs declaration), a person had to hand it over to the state within several days. In exchange, they were issued with special certificates that could be spent in the ‘Beryozka’ chain of stores. Unlike ordinary stores with empty shelves and shortages of everything, Beryozka stores were chock-full of stuff to buy. However, those who had Beryozka certificates were very few: usually, they were diplomats, sailors, members of the party “elite”, athletes or actors.
However, this procedure applied only to money exchanged within the Soviet Union. For foreign currency earned abroad, another procedure was in place: First, the person who earned the money in foreign currency had to hand it over to the state, which took an interest from it and put the rest into a bank account in the person’s name. Cash from this account could be withdrawn only on subsequent trips abroad.
To transfer money abroad and cash it in a foreign bank, a special permission from the state was needed, too.
All these rules did not apply to foreigners, who were free to spend their dollars in Beryozka stores or exchange them for rubles at the official rate. You may wonder how the rate was set if dollars were not in free circulation and their value was not driven by the market forces of demand and supply. Well, the Soviet system took care of that, too.
A propaganda stunt
Even when a person had official permission to exchange rubles for dollars, there was a limit on the amount that could be exchanged: officially, no more than 30 rubles. “Soviet people would carry suitcases full of canned food on trips abroad, so as not to waste precious foreign currency on buying food and instead spend it on clothes,” social media users recall.
At 67 kopecks to a dollar, the official exchange rate was unjustifiably low. Paradoxically, every month the official Izvestia newspaper published the ruble exchange rate to foreign currencies, with minor fluctuations from month to month. That is, every Soviet citizen could read that, for example, in September 1978, 100 US dollars would cost them 67.10 rubles; 100 French francs, 15.42 rubles; and 100 German marks, 33.76 rubles.
Looking at these exchange rates, the reader was supposed to reach only one conclusion: the Soviet ruble was the strongest currency in the world. The publication of these figures pursued only one goal, that of propaganda. Whereas the real market value of the Russian ruble was very different indeed.
Prison or execution
Soviet people were “cut off” from foreign currency in 1927, when the Bolsheviks banned the private foreign exchange market. Before then, people were free to sell, keep and transfer any foreign currency. Exactly 10 years later, Article 25 was added to the Soviet Criminal Code, which equated foreign currency transactions to treason.
Explaining the Soviet ban on the dollar, Joseph Stalin said: “If a socialist country pegs its currency to a capitalist currency, then this socialist country must forget about an independent and stable financial and economic system.”
Illegal dealing in foreign currency was punishable with up to eight years in prison. In 1961, already under Nikita Khrushchev, Article 88 was added to the Criminal Code, which envisaged a punishment from three years in prison to the death penalty (execution by shooting), if dealing was in particularly large amounts.
Such severe persecution of foreign exchange dealers was a reaction to a thriving black market that operated despite all official bans. It was there that the real exchange rate of the Soviet ruble to the US dollar was set, and it was not 67 kopecks, but 8-10 rubles to a dollar.
Black market dealers bought dollars from foreign tourists, lying in wait for them at hotels. For their part, foreigners readily agreed to sell their dollars to the dealers since the latter paid them five to six times the amount they would get from a Soviet bank at the official rate.
The Stalin-era ban on the circulation of foreign currency and capital punishment for foreign exchange dealing remained in force in Russia until 1994. Although, the authorities began to turn a blind eye to these violations even before then. As one user recalls now: “I ordered two shots of vodka and two ham sandwiches at the bar (the year must have been 1990) and silently put my first dollar (I had been given it as a present) on the counter. Also silently, the bartender even gave me some change for it in rubles.”
If using any of Russia Beyond's content, partly or in full, always provide an active hyperlink to the original material.
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9245
|
dbpedia
|
3
| 63
|
https://www.cia.gov/readingroom/document/cia-rdp80t00246a001700410001-7
|
en
|
RUBLE EXCHANGE/INTERNAL LOAN POLICY
|
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https://www.cia.gov/readingroom/document/cia-rdp80t00246a001700410001-7
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Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Next 2 Page(s) In Document Denied Iq Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 25X1 The introduction of a new rate of exchange for foreign currency into Soviet money for tourists coming to the USSR by no means signifies that the stability of the ruble is wavering. This s tleo has merely been taken for the purpose o E making it easier for tourists from other countries to visit the USSR. The official course of the soviet ruble remains just what it was: four rubles to the dollar. All financial operations with offices and organizations in other countries are based on this course. It is merely that an exemption has been made in the case of individuals -- of foreign tourists in this country -- an addition of six rubles to the official cou-rose of one nmerican dollar. As a matter of fact there is really nothing new in this measure. Most countries in addition to the usual official course have some type of special course for individual cases. Tow as far as the postponement of payment on our loans is concerned, that cannot possibly have 'ny effect on the course of our ruble abroad, for the reason that no one in any other country possesses Soviet loans. The truth is that the ruble is more stable than ever. That is nuite understandable, in my opinion, inasmuch as the state does not have to make payments on the loans for the next twenty years. In order to understand why payment on the loans has been postponed, a little bit about their nature must be understood. The Soviet Union received a backward and poverty-stricken economy as a herita-e from tsarism. T remendous funds were needed to develop industry and agriculture. whey could not be obtained abroad -- the cap-i_talistJcountries refused us credit. Under these circum- stances, the assistance accorded by the population in voluntarily giving the state part of their earnings constituted an important contribution to the development of our econ miy. During the first five-year ;?le.n the sum received from the population in the _:'orm I Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 --- Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 of loan subscriptions was equal to the co ct of bui l:lin2 three: iron and steel plants as ln.r.;e as the one at 1ia;nitogorsk. But it {roes without sayin, that the state cannot -float loans indefinitely. If they continue to be issued in increasin, sums, it becomes a burden for the population. And if `they c'.re is >ued in smaller sums, almost the entire sum will be used up in rpajin" out winnings and paying off loans that have expired. hs a result ther?E would be an endless and burdensome roces~3 of issuing and 'aying out loans that grew larger all the time. The soviet government decided, be{;inning '-iith 19'8, to :stop floating state loans and to postpone payment on the old loans for a 20 year period. The draft of this pl _en was placed before a popular poll and had the approval of the population. Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 1st Program. We have received quite a long letter from one of our listeners in the U.S. and he25X1 begins by saying: "The February issue of Fortune Magazine carried an article dealing very extensively with the Soviet Union. After reading it, I have had several questions enter my mind." he would like us to answer his questions. This it is our intention to do. We will not stop now to read you all 25X1 his questions, as there are ten of them and they are quite full. We will simply say that they cover a broad range of problems from last year's events in Hungary to next year's World Fair in Brussels, and that Radio Moscow has asked its commentators to answer them one by one in the course of ten days,beginning today. The talks will take place every day at the same time -- 18.50 EST, with a repeat three hours later at 21.50. Today our commentator Alexander Alexandrov replies to first question. Your first question is whether the people of 25X1 Soviet Russia know the story of the Hungarian revolt, and also the opinion of the United Nations on it. In order to understand what raised that question in your mind, the first thing I naturally did was to find out what Fortune Magazine had to say about Hungary. And the main conclusion this left me with was that it was not for the Americans to ask us such aquestion, but the other way around -- It's we Russians who ought to be asking the Americans how much of the truth they 'know about what happened in Hungary? What makes me say that? Well, we Soviet people were too close Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 i Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 2. to the events there, living through them as we did right from the first day to the last, right at the side of the Hungarian people, not to know exactly what happened in Hungary. Soviet people not only heard how things were going there from their papers and the radio reports, but as soldiers in the Soviet Army they saw what was taking place on the streets of Budapest and other cities in the country with their own eyes. They saw the gangs that had carefully armed them- selves to the hilt well in advance of the events crawl out of their hiding places.and try to overthrow the legally elected government of the people. With their own eyes they saw American and west- German arms and equipment being moved into the country through the open border from Austria, and detachments of~ counter-revolutionary emigrees sweeping over that border. With their own eyes they read the American leaflets that were dropped on the streets, and with their own ears heard the American radio broadcasts urging the people to revolt. And they were there watching, too, when the insurgents opened the doors of Budapest's prisons and let out 10,000 common criminals and 3,000 Nazi war criminals, spies, and fascists. In front of them and the horrified inhabitants of the city, these cut- throats burned, hanged, and hacked to death Hungarian patriots, murdering these ordinary workers and clerks, Communists and non- Party people merely because they had remained faithful to their country and its popular, democratic mode of government. Finally, we Soviet people were able to personally apprise ourselves of the purpose of all these atrocities. With our own eyes we saw Otto Hapsburg, and Duke Josef, and Count Estergazy and the other landed aristocrats come out and demand the return of their lands, which had been distributed among the needy peasants of the country as a result of the peaceful revolution of 1945. We also heard .the Hungarian reactionaries announce that they meant to take the Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 3? factories away from the people and give them to the capitalists. We saw the Horthy gangs try to reinstate the old fascist regime which had chained and oppressed the people of Hungary between the first and second world wars. Nor is that all. We Soviet people also know the truth about Hungary because we were the only ones who came to the aid of our brothers in Hungary and helped them put down the uprising. And today we are giving them every possible economic assistance to help them heal the wounds left on the economy of their country as quickly 25X1 as possible. In case the American press has failed to tell you about it, let me give you a few facts about the nature of this hel Immediately after the disturbances, the Soviet Union sent Hungary huge quentities of foodstuffs, fuel and building materials, to keep the Hungarian people from becoming a prey to famine, cold and other hardships. These supplies were gratis. As a result of the talks held, in March between the two governments, Hungary is to receive goods and free valuta to the tune of 214 million dollars from the Soviet Union this year on a favourable ten-year, two per cent credit basis. And there is another point The Soviet people also 25X1 know the truth about the Hungarian uprising because they have been welcoming representatives of the Hungarian people and government to our country and receiving them here as dear guests. And these representatives, including Yanosh Kadar, the head of the government, have made public speeches here giving us all the details of what happened in Hungary last October. 25X1; That's how things stand with regard to whether or not the people of Soviet Russia know the true story of the Horthy counter-revolutionary uprising. The way your question is put, one would think that somebody was trying to mislead the Soviet people, whereas the American people had been told the whole truth and nothing Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 Approved For Release 2008/11/12: CIA-RDP80T00246AO01700410001-7 but the truth. ' That's really where the tragedy lies -- the truth 25X1 about Hungary has been carefully kept from the peoples of the west, and especially the United States. It has been kept from them deliberately, for underhand reasons. By whom? you ask. By the same circles in"the western governments and political parties that encouraged the insurgents and helped them. And their purpose in doing so has been to hide their own part in organizing the counter- revolutionary uprising and to try to use that situation as another weapons in their cold war against the Soviet Union and People's Democracies. Unfortunately, the bourgeois press is the faithful servant of these same circles, and far from helping the American people to understand what happened in Hungary, it is doing everything it can to prevent it. Judging from your question, you too. have accepted the Fortune Magaine's false version, which shamelessly makes out the counter-revolutionary uprising in Hungary to be a people's revolution and claims that it was brutally crushed by the Soviet army. Yet Fortune is only. another of the Henry Loos publications which are known to specialize in vivious slander of everything Soviet. Can such a publication be expected to present objective reports on Soviet policy and activities? Obviously not. You must have noticed that not a single one of the anti-Soviet statements in the article is bolstered with facts. Fortune's version of events in Hungary is only a continuation of the big campaign of distortion and lies that other American magazines and newspapers have been conducting for some months now, and with them, the diplomats of both the United States and other western countries. That explains how the Hungarian question came up before the General Assembly in the doctored version with which Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 you are acquainted. The Assembly set up a special committee to investigate the situation in Hungary. But, strangely enough, the investigation is being conducted in the United States and west European countries; runaway traitors and enemies of the Hungarian people's government are being interrrogated, and the same lies and slanders they used to whitewash their crimes are repeated in the .committee's reports. And then this is passed off on the public as the truth about Hungary! Only fear of the truth can explain the hostile attitude the American and certain other western government have 5. taken to the present Hungarian government. The latter, after all, is in all respects the lawful government of the country, and the western countries maintain diplomatic relations with it. And yet not a single one of them has considered giving it material assistance. UNO is holding back the mandate of the Hungarian delegation to that body. Early this month the American and British embassies refused to attend the memorial ceremony in Budapest when wreath were laid on the graves of the American and British soldiers who gave their lives in Hungary during the second world war. Aside from the fact that this was an-insult to the finest feelings of the Hungarian people, it seems to say that the American and British governments now regret that their soldiers gave their lives to help free the Hungarian people from fascist slavery. Perhaps it was something of the same feeling that drove them into such a rage when a new attempt to enslave the Hungarian people failed last October? All I can say in conclusion, is that the hostile propaganda unleashed in your country against the Soviet and Hungarian peoples is hardly the right prism to look through if you want to see the truth about Hungary. Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 2nd Program Yesterday we began a series of replies to ten questions from an American listener the coming days we s hall reply to another Every day for 25X questions. Today you hear the reply of a Soviet journalist, MMMikhail25X1 Nadezhdin which read as follows: Do Many people flee into either Russia or the satellites each year? How many? Here is what Mikhail Nadezhdin says in reply: In your letter of April 2nd,l you ask whether many 25X1 people come to Russia and the people' democracies to live. I under- stand that you are interested in who these people are and why they come to our country, or, if they were formerly Soviet citizens, why they return to their homeland. To understand, that we must first take a look back. You have probably heard that following the war quite a large number of Soviet citizens or so-called displaced persons found themselves in West Germany and other countries Nazis had driven from their former prisoners of war, had disgraced themselves in the West. These were people whom the homes to work in other countries, or a certain number of people who by collaborating with the Germans during the occupation and retreated punishment. After the war, most of the Soviet Union. There are with the Nazis in order to escape these displaced persons returned to still some living abroad now, and not only criminal elements, but honest people too -- although the latter are in the mindrity, -- and if they have not returned, it is only because the command of the British and American Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 ____ Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 occupation armies it West Germany tried so hard at the time to keep them from doing so, intimidating them with stories to the effect that. their very having beem abroad was a "crime" in Soviet eyes. From a human point of view, it is easy to see how these stories could give rise to doubts and hesitation in the minds of the displaced persons in question. Living far from their country for many years, and subjected to the false and hostile information of the foreign press and hearsay, one can readily understand why they lost their heads. But now these same people are coming back by the thousands. And Why? Because they have realized what a mistake they made. also because the Soviet government has facilitated their return by granting amnesty to all former collaborationists. Even those who took part in anti-Soviet subversive organizations after the war have been assured safe return and pardons provided they make a clean breast of their deeds. Let me give you several examples thatshow what prompts people to come back to their homeland. As a journalist, I have met quite a few of them. Johannis Skeberdis has returned to Lithuania from Canada. "I lived abroad for many years," he related, "and what have I to show for it? Perhaps I became a scientist, or an engineer, or even just a skilled worker in Canada? Nothing of the sort! All I did was wash dishes in a restaurant at 75 cents an hour. Life has turned out differently for my son, whom I left behind in Lithuania when he was just a little boy. He went to college, and became an engineer..." The stories of many of the other displaced persons are no different. I wouldn't say that all of them have had the same fate abroad, but it is certainly true of the overwhleming majority. U Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 3. How about those who betrayed their country during or after the war? Well-- they are lso coming back. I have been to Ostankino, where Victor Zalessky now lives and works. Taken out of the country as a prisoner of war, he succumbed to the anti- Soviet atmosphere of migree circles abroad and for four years was active in the subversive anti-Soviet organization known as the "League of Struggle for the Emancipation of Russia." Today he is teaching mathematics in Ostankino, in one of the building schools is there, while his wife heads the curricular department of one of the municipal schools, and his dauther is a student in a Teachers' College. There are scores of people like Zalessky who have come home and found a place for themselves again in life. Among them are quite a few who while abroad were enlisted for espionage Work by American and other sevret services, underwent training there, and were sent to the Soviet Union to carry out secret assignments. I don't know whether you have read the reports of the press conference given by a group of such people at the Soviet Foreign Ministry. In case you did not see these reports, let me quote from the account one 25X1 of the men, Nikolai Yakuta, gave at press conference. "It took us some time to make up our minds to give ourselves up," he stated. "But contact with Soviet realities showed us that we had been cruelly deceived by the American secret agents, and that they had lied to us about our people". By the way not only Soviet citizens come to the Soviet Union to live. In recent years there have been many applica- tions for permission to live in our country and to take out Soviet citizenship from foreigners as well. Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 25X1 11 many people come to the Soviet Union and 25X1 all kinds of people, with all kinds of reasons for taking this ,step,, but common to them all I believe is the realization that in the Soviet Union they can live and work for the benefit of society under conditions of freedom and democracy. And that suggests another example, which I am sure you too will find very interesting, Mr. Kuehn. Last September the Red Cross societies of Spain and the Soviet Union reached an Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 5. agreement on the return of about two thousand Spaniards to their own country. These were people who had been received here as small children, at the time of the civil war in Spain, at the request of their parents, who wanted to save them from the horrors of that war. They left the Soviet Union last September, and by the middle of Apri some two hundred of them were already back here from Spain. The other day I met several of them and asked them what had induced them to come back. Each replied in almost the same words: "The working man has a better time of it and is freer in your country than in Spain". As for why foreigners go to the people's democracies to live, I don't know that I can speak for them (perhaps it 25X1 would be better if you asked them directly. All I can suggest is that they are probably motivited by much the same reasons. v Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 3rd Program 25X1 One of our American listeners question has addressed ten questions to Radio Moscow which25X1 occured to him when reading the articles about the Soviet Union published in the February issue of Fortune Magazine. our commentators are answering these questions in a ten- day series of talks which began last Saturday. You, will be able to hear them every day till April twenty-ninth inclusive, at 6.50 Eastern Standard Time, with a repeat at 9.50. In this evening's talk, our staff commentator,Alexander Alexandrov answers writes: Your third. I quote: "Since Kremlin has been Do you feel that you will recall, is this. 25X1 collective leadership has replaced (Stalin the losing its grip on foreign Communist Parties. this decentralization is good or b'iad?" Your statement of the question is incorrect from beginning to end, and that is the outcome of deep misconceptions and a lack of knowledge of the real state of affairs. I ',have to tell you this for the sake'o.f truth. Apparently 25X1 a desire to know the truth was the motive behind your questions. Fortune Magazine which led you to ask your question was guided by entirely different motives. Its aim is to instill hatred and suspicion of everything Soviet and to create the impression that people in other countries censure the way of life the Soviet people are building and defending. And in order l to prove the unprovable, it has to dissemble, juggle facts, and engage in wishful thinking. The cold war crusaders have to third question. Here is what he 25X1 .1 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 - Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 resort to such means beccause they have no others. But to get down to the essense of your question. "hy is your statement of it incorrect and unfounded? Fortune has started talking about "de-Stalinization" in ahattempt to discredit the USSR and Communism. As a matter of fact there is no de-Stalinization just as there is no need for such a thing. In the closing period of his life, Stalin did commit a number of errors. But that was not all that he did. And who does not make mistakes? For that reason, the Soviet people, having revealed those mistakes and roundly condemned them, continue to place high Stalin's tremendous services to the country. And in order to ensure against such mistakes being repeated, the Communist Party of the Soviet Union has established principles of eollective leadership and is continuing to strengthen and develop democracy in all sphere of life in our country. For that reason, it is 25X1 incorrect to contrast a period in Stalin's life with the present collective leadership. The"Com-munist Party's chief aim now remains, as before, to work for the welfare of the common people. And that brings us to the second part of your question, I don't want to be rude, but to allege, as you do, 25X1 that the Kremlin controls communist parties abroad shows that you have a completely distorted idea of the Soviet Union, its Communist Party and the international Communist movement. The enemies of Communism thought up that falsehood in order to scare people with the notorious "Communist Menace", and. with myths about the world Communist plot. But how could anyone believe it? The colidarity among the Communists in different countries Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 3. stems from their-common aims which are to create a state system under which there would be justice, freedom and democracy for al J lth shared in common. But that solidarity of ideas all wea and s never had anything in common with a plot nor with interferen?4 ha C i sm ommun ce by one Communist Party in the affairs of another. is a science created by the great humanitarians, Marx, Engels and Lenin. And Communists in any country know that a new system cannot be imposed from without. But if the conditions for its ascendancy develop, the people of the country concerned will occupy themselves with consolidating it. Outside inter- ference, Communists hold, would only injure the cause. Lenin many times referred to the export of Communism as nonsense. And look for yourself and see what the solidarity, friendship and cooperation among Communists of different countries has meant in.practice. They all, in cooperation with other democratic organizations, came out in a united front in the period between the two wars, against the plans for preparing another slaughter, and they carried on an energe- i N s the az tic struggle against those who were preparing it - fascists in Italy and Spain, and the militarists Germany, the were t t s in Japan. And when the war did break out, the Communis among the first to call for resistance against the aggressors and to lay dowm their lives for the liberation of their les from the horrors of Hitlerism? eo p p Since `r orld War II, the Communists of different countries have taken similar stands where ways for promoting peace and world. security are concerned* They are unanimous in their demand for universal disarmament, a ban on the nuclear weapon, _ Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 4. a stop to the cold war, and for the government to renounce the policy from strength. 'hey are unanimous in wanting peaceful coexistence and the development of friendly trade and cultural contacts among nations. And though certain of the haters of Communism and the chasers after profits from another war don't like this unanimity, that does not mean that it is a bad thing. The Communists are unanimous on these points because they all want a lasting peace for mankind and peaceful coexistence of the two systems. That is also "eninist policy. But you should understand yourself that to have a common viewpoint on the problems of humanity does not mean that one party is giving orders to another. No Communist Party, and the Communist Party of the Soviet Union all the more so, desires anything of the kind. o dictate would only disrupt unity. And the talt about such a thing is merely a malicious fabrication by enemies of Communism. For that reasons your question about a "decentralization of the inter- national Communist movement is merely a misunderstanding arising from your believ in these fabrications The revelation of Stalin's mistakes has beyond doubt LJ~.I impelled the Communist parties in other countries to make a critical review of their activities and to eliminate their own mistakes if they have made any. ?l he elimination of mistakes and misunderstandings, naturally, will still further strengthen the international mutual understanding among Communists. of mankind And that, from the standpoint of the interests will be a very good thing -- a very good thing. I Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 CIA-RDP80T00246AO01700410001-7 4f 4th rogram. listener in the United States We continue now with our answers to questions by a February issue of Fortune magazine, a number of questions In reading the articles about the Soviet Union in the 25X1 occured which he has addressed to Radio'Moscow. 25X1 We're answering them in a series of talks which will be on the air every day till April 29th at 6.50 p.m. Estarn Standard Time a repeat at 9.50 p.m. Tonight we're answering fourth question. Hez25X1 is what our commentator Alexander Alexandrov writes about it. 25X1 As usual, we'll begin by quoting your questions. You write: "With the de-Stalinization of Russia your country has moved closer to a peaceful stand on world problems. As your five- year plans are continued they are becoming more and more successful. Your country is moving closer and closer to a Socialistic way of life. Is it possible that the future may see Russia ruled by a. council of several men with supporting legislatures, and that your country will continue past 6ocialism and drift into Capitalism? that, as you see for yourself, is the dream of the editors of the magazine Fortune we are talking about. However, they have a bitter disappointment coming to them. But before explaining to you just why that will happen, I want to make a couple of remarks concerning the wording of your question. Neither the Soviet people not their Communist Party nor their government have been "de-Stalinizing" as you put it. Nor have they any intention of doing so in the future. And that is for good and simple reason that there has never been any such r; thing in existence as "Stalinism". That is a vulgar term If not, why not? As conserns Russia's returning to capitalism, 1 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 2. invented by anti-Soviet propagandists in order to discredit the great process of building a Communist society in the USSR. That society is being created in accordance with Marxist-Leninist scientific theory. Furthermore, what do you mean by your assertion that Russia has moved closer to a peaceful stand? One would have to be blind not to see that Soviet Russia took peaceful coexistence, a struggle for peace, and friendship among nations as the corner stone of her foreign policy. right from the beginning -- from the very first day of her existence. And the Soviet Union has never deviated from ? b that course and never will deviate from it. If a number of vexting international problems - problems of our time still remain unsilved it is not our fault. To my mind, it is the actions of the American government that are forcing its country and also its allies in Western Europe to be eternally balancing on the brink of war. But that's just a remark in passing -- just for clarity. 25X1 Now for the chief point in your question We are not only, as you put it, "moving closer and closer to a 6ociastli way of life," we have in the main, already built socialism, and are now beginning to develop it further -- to carry out gradually the transition from Socialism to Communise. Millions of people take an active part in administering the Soviet state, in the most democratic possible way. Why should we give this up? To make it clear to you -- I'll just recall for you the main features of the Soviet system. The highest government body in the USSR is.the Supreme Soviet, an elected body. It does not consist of a few members, but of more than 1300 deputies. And they are not professional politicians who are out of contact with the people as they are in the Western countries including Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 wow_ 3. yours, but of workers, peasants and professional people really chosen by the people. And each of the republics of the Soviet Union has its own Supreme Soviet which exercises the highest power there. The government bodies in the smaller administrative areas of the country -- the territories, regions, districts, cities and so~~on, are also.elective bodies -- local councils of.people's deputies. The Supreme Soviets appoint the highest state administra- tive bodies -- the Council of Ministers of the USSR and of the republics. The local administrative bodies are the executive committees of the soviets, or councils, of people 's deputies. This system ensures the Soviet people-against any violation of the laws; it ensures them that the state will look to their welfare, and it also ensures them broad democracy. Citizens of the. USSR .enjoy freedom of speech and the press, freedom of conscience, and freedom of assembly including the right to hold meetings, street processions and demonstrations: IT heir persons and their homes. are inviolable and the secrecy of correspondence is absolutely guaranteed. From this, of course, it is not to be assumed that our system of state administration will never have changes made in it. It is being improved constantly. Right now, for instance, the whole country is discussing proposals for reforming the management of Soviet industry by doing away with the centralized ministries and replacing them by economic councils which would manage industry in economic areas. The progress of the socialist system means the development of freedom and democracy for allrmetmbers8 of. society. According to the sd.ientific deductions..of 16arx.,' Engels and Lenin, when a Communist society is b-uilt;' it will be poes.ble to do away of others. And thaat . is bb l I rgpan vz cv na~~usz~iv , vy JLU #"-'' '- ' take. place. Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 4. And since the Soviet people do not want illusory 25X1 bourgeois democracy, they are still more against any resurgence of capitalist ways in their country. I know the Western press just licks its chops whenever the Soviet Union tackles some temporary shortcoming or other in its economy. It gives it an opportunity to shout: "Crisis in the USSR! "state capitalism", and so on and so forth. That's just the hue and cry you are witnessing now. And Fortune has joined in it. In a word, the enemies of socialism are doing their best.to persuade the Western public that nothing has come of socialism. But they are doing that most of all because all is well with socialism; it is not socialism that is falling to pieces but capitalism. And since socialism has shown its advantages, since it is having one success after another, the Soviet people will never give it up. They will advance further, and only towards Communism. It is socialism that is responsible for all the economic and cultural achievements of the peoples.of the USSR. Now all the country's wealth, its floarising industries, its rapidly developing-anr:riculture, its mineral resources, its forests -- everything in the country -- belongs to the people and the people enjoy it all together. They are developing their economy for the common good. And only the most naive could imagine that they would ever take it into their head to give all that to capitalists and take to breaking their backs a-;ain, to give them profit. Russia has already tasted the joys of capitalism -- she has drunk deep of a huge cup of bitterness, sweat and tears. And her people will never try to turn the wheel of history back, nor will they permit would-be restores of capitalism to=.&o it from outside. Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 5th . rogram. This evening we're answering we quote: "Is your labor organized into unions'Y 25X1 } What caused the sitdown strike in the Kaganovich bearing plant?" Our staff commentator Lyev Setyayev, has answered the question. Here is what he writes: There Eire 'trade unions in the USS~ an important part in the life of the country. Your question is a very typical one from an American. It has been asked in several of our letters from the United States. It is true, as a matter of fact, that it may seem strange at first glance that there should be trade unions in the USSR. There are no private oropriators against whom it might be necessary to defend the workers' interests. The factory managements consist of state employees just like the workers themselves. Both of them are working for the same aim -- the building of socialism. That means that the workers and the management have the same interests. it must be borne in mind here that the management may wever H , o make mistakes, there may be shortcomings in its work which affect the position of the worker. It is in such cases that trade unions are needed to defend the interests of the workers. Vladimir Ilyich Lenin called the Soviet trade unions "schools of Communism' The trade unions teach the workers how to manage socialist industry.! the trade unions in the USSR are a major force. They have a membership of over forty-five million. `hey have branches at every factory and institution. The unions see to it that safety regulations and wage laws are observed; they conclude yearly contracts with the factory managements, and occupy themselves with social security, improving living and working conditions, vacations, and so on. In his theses on the reorganization of Soviet economic management, Nikita Khrushchev underlined that in the future, the role and significance of the trade unions in Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 managing enterprises would still further increase. Labour and wages are among the most important things the trade unions occupy themselves with. They take part in planning the payroll, and see to it that the worker gets the right pay for his work. At the end of last year, for instance, the wage scale at many factories was raised. The project was worked out by the USSR Central Council of Trade Unions, and before it came into force, it was discussed in details by the workers at factory and shop meetings. They made many suggestions and amendments to it. In your letter, you mention the Kaganovich 25X1 Bearing Plant. So in my remarks about trade unions I shall be taking my illustrations from that plant. It is interesting to note what has been done there to improve working conditions.. Last year over one million rubles was spent for the purpose. In the automatic turning ship, mobile devices for handling the heavy machine-parts was installed. In the roller-bering shop, five cranes were installed for transportation purposes. In the forge, automatic devices for handling the blanks to be forged were put in. Now the workers don't have to do any of this by hand and the accident risk has been completely done away with. The trade unions have charge of the distribution of state social insurance. They issue sick insurance and see to it that the medical services and health protection measures are kept at par. The trade unions also provide their members with health- ful and. pleasant vacations. hey arrange for their accomoda- tions at health resorts, and pay seventy percent of their cost. The worker pays only thirty percent. So if the cost is a thousand rubles, the worker only has to pay three hundred. Last year, the trade-union at the Ka-anovich plant paid out about a Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 3. million rubles for this purpose. Also the trade union maintains a so-called night sanatorium for the workers at the plant. It can, take care of seven hundred people a year. The worker spends all his time outside working hours at the sanatorium. He sleeps and gets his meals there, and is given whatever treatments he needs. There are also recreation facilities at the night sanatorium. The trade unions do a great deal to improve the living condi- tions of the workers. The Fearing Plant is building a lot of housing for its personnel. Just recently a seven-story apartment house was turned over for tenancy there. Also, many of the workers are building their own homes. The trade union gives them loans on easy terms and helps them with building materials. Much is done to im,)rove the cultural level of the workers. The plant has its own club where the personnel can see a movie, dance, and enjoy a considerable number of recreation facilities. The factory trade union committee also maintains a big library and reading room for the personnel. As for the sitdou'm strike that supposedly occurred at the Bearing Plant, Fortune has ben pulling your leg. There was no such thing. The rumours the Western press circulated about it were refuted long ago by Radio Berlin correspondent Heinz ~'?~ Stueler. About a month ago, he decided to check up on them. Stueler had detailed talks with workers and trade-union leaders at the plant and, when he asked them about the rumoured strike, they were very much surprised. For that reason, it would have been much more correct to state your question in this way: Are there any labor disputes at Soviet plants, and if so, how are they settled? Labour disputes between personnel and management do occur, and we're not afraid to talk about them. Disputes may occur concerning pay for overtime, payment of bonuses, dismissals Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 from work, and so on. There are special commissions, called labor dispute commissions at every enterprise which settle such disputes. They are made up of an equal number of members of the personnel and the management, all of whom have aneclual voice in the matter. Each case is discussed in the presence of the person cohcerned, and the committee's decision does not have to be approved by any other body. If the person is not satisfied its decision he can go to law about it. with I went to the Bearing plant today in connection with your question and had a talk with Vitold fsheradovsky. He works in the,machine-repair shop and is one of the workers' representatives on the committee on labor disputes. I asked him for some examples of the disputes which had been decided in favour of the workers. Vitold Psheradovsky said that the committee had had such a case just recently. One of the shop foremen, Anisimov, was discharged as being redundant on Janury twenty-fourth. The personeel department did not find him another job and Anisimov was without a job till Narch fifteenth. He demanded pay from the plant management for this time. The management refused to pay the whole sum, but the committee took the side of the worker and the plant paid him his average earnings for the time he was out of work. Or here's another instance-of the kind. A mechanic named Sorokin, in the roller-bering shop, repaired several machines in January and he got a bonus for the job. But in February, one of the machines broke down again, and fifty percent of Sorokin's bonus was deducted from his wages. Sorokin applied to the committee of labour disputes. A through investigation was made and it was found that Sorokin's work was not to blame for the machine's breaking down. Sorokin's bonus was returned. Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 Approved For Release 2008/11/12 CIA-RDP80T00246AO01700410001-7 5. 25X1 And so you see labour disputes in our country are not settled and never have been by strikes of any kind. The workers just haven't any reason for striking. Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 bth2rogram. This time our observer Stanislav P11enshikov is replying to the sixth questio "does your industry 25X1 estimate it will be able to enter world trade competiion on a large scae? What products do you think will be exported?" In replying to those-question I should like tc25X1 make the point right at the outset that they are really not worded quite correctly. The Soviet Union does not intend to take part in international competition, because our economy does not and will not experience any heed for the conquest of world markets. Now that may sound strange to people living under the conditions of the capitalist system and accustomed to seeing day after day how private business houses, large and small, do their.utmost to raise their sales and the level of their profits, making use, among other things, of the markets of other countries. There are no private companies in the Soviet Union. The overwhelming majority of the goods turned out belongs to the state. Goods are made and sold according to a general plan. And for that reason we always have the opportunity of finding the best consumer for any goods right here in the country. This does not mean however that we are not interested in commercial ties with other countries. To promote its economic development the Soviet Union readily makes purchases abroad of many types of machines, equipment and raw materials. But trade cannot be one-sided. In order to have the opportunity of importing the goods we need, we must sell our own goods in other countries. Our state sets aside a certain part of the output of industry and agriculture for export. And our foreign trade organizations see to it that these goods are purchased by foreign consumers. Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 2. 25X1 The Soviet Union now has extensive business ties with the People's Democracies in Europe and Asia. But this is certainly not a question of competition. Our economic cooperation with the countries belonging to the socialist camp would more correctly be called mutual assistance. By means of mutual trade, the socialist countries are working to-11ards unity of effort, and are helping each other in achieving a rapid economic upsurge and technical progress. In trading with the underdeveloped countries of Asia and Africa, the Soviet Union follows consideration of mutual advantage!! At the same time, the Soviet Union is ready to give and does give economic help to 'those underdeveloped countries which desire it, without any strings attached. The Soviet Union is also interested in extending its commercial contacts with all countries because this would help to improve the international political atmosphere. You can see from what has been said that even 25X1 though the Soviet Union is not entered in world trade competition to use your own phrase -- it has extensive foreign trade ties and is interested in seeing them still larger. You would be wrong you thought, as is so often assumed in the West, that our country holds only a modest place in world trade. On the contrary, the USSR is today one of the largest trading nations in the world. Its total foreign trade turnover amounts to more than six billion dollars. Only five other countries, the United States, Great Britain, West Germany, France and Canada, have a larger foreign trade turnover than we do. Before the second world war, the situation was quite a different one -- we held only 16th place in the world then. So it has been precisely in the past few years, in spite of the unvilling- Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 3. ness of a number of western countries to trade with us actively, that the Soviet Union has begun to conduct its foreign trade on a truly large scale. And in this same period another very essential change has taken place. Soviet industry has been advancing rapidly and has begun to enter more and more actively into our exports. The Soviet Union has now become one of the most important exporters of oil products, ferrous and non-ferrous metals and, what is especially important, machines and equipment. The specific weiTht of the latter in total Soviet exports has now grown to 22 percent, as-against 5 percent in the pre-war yesrs. Soviet engineering plants export equipment for the oil, mining, chemical, steel and aluminum industries, for electric power stations, they export tractors and other farm machines, automobiles and other goods. Soviet equipment finds eager buyers not only in the People's Democracies and the underdeveloped countries, but also in some capitalist states with well-developed industries..' recall hat Dressers industries of the 25X1 You may' United States last year bought from the Soviet Union the licence for the manufacture of a new Soviet-designed turbo-drill. But the U.S. State Department stepped in and. prevented the deal from being realized. It is a fact, however, that there are busine3s men in the United States who are interested in the purchase of Soviet goods. Judging by the Way Soviet industrial goods are regarded in foreign countries, their export should be increased greatly in the next few years. This is a natural process. No matter how hard the author of the article in the February issue of Fortune tried to prove that there was a "crisis" in Soviet industry, facts remain facts. Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Of the 40 years that the Soviet government has existed, 18 years have been spent fighting wars forced on our country or liquidating the economic consequences of those wars. Neverthe- less, as compared with the pre-revolutionary period, the volume of industrial production in the USSR has risen 30 times, and as against 1940, four times. In the case of the machine building and metal working industries, output has risen 180 times since 1913. The Soviet Union. has become the second most.important industrial power in the world, and is confidently overtaking the first -- the United States. This means that Soviet foreign trade in industrial products will continue to grow. Sometimes the expansion of Soviet foreign trade is pictured by the press in your country as some kind of an "export offensive" which, supposedly, threatens manufacturing firms in the United States with the loss of markets. I do not believe there is any serious justification for fears of this kind. The volume of international trade has been growing of late, and there is plenty of room on the world market for all the goods for which a demand really exists. On the other hand, the increase of Soviet industrial exports does not mean that we have any intention of cutting our imports of the products of foreign industry.. OUT country continues, as in the past to be a large importer of machines and equipment. Many firms in Western Europe, which have regular dealings with our foreign trade organizations, know that the Soviet Union imports machines and equipment-every year to the approximate value of one billion dollars. Our imports in this field include sea-going and river boats, boilers, power station and foundry equipment, machine tools and so forth. There could be nothing more absurd than to think that the Soviet Union is striving toward autarky, which is a national policy of netting ~r. Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 along without goods from other countries. In my opinion,F all of the aforesaid offers a sound basis for closer commercial ties being established between the Soviet Union and the United States, and I sincerely hope that such contacts will develop more successfully in the future than they have up to the present. Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 7th Program. 25X1 Toni ht we deal with his 7th question "Russia's problems stem from the time of Peter the Great and his quest to westernize Russia by obtaining warm water sea ports. Is Russia still trying to get these warm water ports? Will they be needed in order that you may enter world trade?" d at is , U - l ? The problem you have in 1I1_L11 warm water seaports, was of great significance to czarist Russia long before. the days of Peter the First. Long after it had become a great power Russia still lacked an outlet to the seas on which lay the international trade routes. That naturally hindered its economic development and so Czarist Russia persevered in its serch for an opening. That does not mean that Russia did not. trade with other countries'. It did, by overland routes. But a great country needs more mercantile arteries with the outside world, As far back as the 16th century Czar Ivan the 4th, known as! Ivan the Terrible, again and again sought to get out to the Baltic Sea. He was frustrated by Sweden and the Germanic states, while in', the south Turkey and the Cirmean Tatars blocked all egress to the Black Sea. By the time Pter the Great ascended the throne Russia's need for broader trade and cultural ties with other European countries had grown much more pressing. That need and aspiration were most plainly expressed by Peter the Great during his reign at the end of the 17th and the beginning of the 18th centuries. After its successful land and sea wars against Sweden, Czarist Russia obtained an outlet to the Baltid Sea. That is when Peter built his new capital, the town and port of St. Ptersburg -- now Leningrad-- on the banks of the Neva. Peter the First also tried to obtain an exit to the Black - Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 yea, but in vain. It was only under Catherine the =nd that Russia at last achieved that goal. The Baltic and Black Sea ports grew very rapidly and served as vital trade arteries to czarist Russia. And when 1-3iberia and the Far East were broucht under its win;, Russia also obtained ports on the Pacific Ocean, but these developed much more slowly, due to their greet distance from the center of Russia. Mention should also be made of the northern trade route, which is connected with Murmansk, a port which never freezes over. From this brief historical note you can see that 25X1 by the time of the 1917 revolution Rurria has sifficient warm water sea ports through which she traded with other countries. After the revolution of 1917 Soviet Russia lived through the difficult years of the intervention launched by the capitalist countries of Europe and America. The interventionists set them- selves the goal of crushing Soviet power and dismembering, Russia. But they never succeeded. The Soviet people smashed then and flung them out of the country. Soviet Russia retained intact territorially, keeping its vital conmetcial ports on the Baltic and Black Sea boards and on the Pacific coast. You ask if the Soviet Union needs warm water ports in order to enter world trade. I think the answer is clear. The Soviet Union already has ports and everything else needed for successful trade with other countries. It does not nerd to acquire any 25X1 more and has no expansionist designs. Our country possesses everything necessary for steady economic development. We have an enormous territory,.covering one-sixth of the earth's surface, and countless deposits of useful minerals. Our country is like an enormous warehouse, with all the iron and coal, oil and bauxite, gold and diamonds and many other rare metals -- some of them exceedingly rare--that are so indispensable in '7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 7 Approved For Release 2008/11/12 CIA-RDP80T00246AO01700410001-7 modern production. The Soviet people will take decades to explicit even a part of these tremendous riches. Take all that into consideration and you will understand many things about our economy, policy and trade, the latter seems to interest you most. Before concluding I want to return to the question of trade. 1e are not selfish, and don't hoard our riches like Midas. We are very willing to share them with anyone who wishes, on the basis of mutually advantageous trade. And there are many countries who wish to trade and to trade with the Soviet Union, both socialist and capitalist countries in the East and West. That brings me to America's trade policy. I don't want to go back to the distant past. There have been bad and good example. There was fruitful trade between our two countries in Roosevelt's time. But let us take the past -ten years. If we look facts square in the face we will see that Washington's Policy for nearly ten years now has been to,set up an embargo against the,Soviet Union. The United States itself broke off trading with us and is trying to compel the West European countries to do likewise. The purpose is clearly to retard our economic development. Has anyone in Washington thoucht whether it is feasible? This is like imprisoning a man in a warehouse full of food and waiting for him to die of hunger. Don't you agree that it's absurd The American 25X1 policy of blocking trade with the Soviet Union is even more absurd. We want to do business with the United States and many Americans obviously want this as well. But the State Department is of a different mind. The Soviet Union is not fading away or dying as a result. Our economy is developing at a rate that neither the United States nor any other capitalist country has ever known. Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 4. The politicians in 'Washington want to fence off the Soviet Union with trade barriers, but we are steadily expanding our commercial connections and increasing our trade turnover every year. And the West European countries have no desire to sit on this American fence. They are doing more and more business with us, despite the American ban. So that the discriminatory trade policy is proving a bommerang, after all. Before closing I want ti emphasize that the Soviet Union has everything necessary for broad, fruitful trade with other countries. Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 the 8th Pro gram. Today you can hear the reply to the 8th question by Moscow Radio commentator Vladimir Volgin. question reads as 25X1 follows: "The Russian government is willing to withdraw its troops from Europe if the United States do the same. is this due to the fact, that too much of your budget, just all 25X1 as ours, is being spent on the armanent race?" Yes, there is indeed a great desire among the 25X1 people and government of the Soviet Union to cut military expenditures, and that is unquestionably one of the things that has prompted the Soviet proposal of which you speak. Still, it is only a secondary, not the main reason. The main reason is that our government regards the withdrawal of foreign troops from the territory of other states as a key to greater trust and under- standing among all nations -- as one of the decisive factors in strengthening world peace and security. Suppose we stop for..a moment, and consider the situation that has arisen in Europe. The Old World is split into two opposing camps. In one of them, NATO forces are stationed, in the other, the forces of the Warsaw. Pact countries. Each has turned the mouth of its guns at the other. We here consider that to be an abnormal situation, and , in fact, a very dangeours one, liable to lead to all kinds of conflicts and clashes. This situation is the direct result of the creation of the North Atlantic Pact. You must remember that without NATO, there would have been no Warsaw Pact. When the diplomats in Washington set up NATO, and began to accelerate military preparations, throwing a rind of military bases around the USSR and other socialist countries, and then began to arm the West-German revanchists there was nothing left for the socialist countries but to take measures to guarantee their own security. And so they --- Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 ?_. concluded the Warsaw Pact. But even at the time o'L its coact sior the Soviet Union came out against the existence of such facts, the effect of 1.Aihich is to split Europe into two military blocs. It still holds to the same view today. "7e believe that the best way to assure Europe and America peace is through a system of' collec- tive security embracing all the countries of i;urope and America. This has been repeatedly urged by the Soviet Union, only to be rejected each time by the United States. It goes without saying that acceptance of the Soviet proposals on the liquidation of such blocs would. greatly facilitate the regulation of the German problem. The evacuation of foreign troops from the territories of both. the German federal and the German democratic republics would pave the way for a settlement of the que_$tion of German unification by the will and energies of the German people, who themselves, after all, are the ones directly concerned. Unfortunately, the ruling cirles of the United States have failed to heed the voice of reason, and are persisting in-their splitting activities, even intensifying them by helping the rebirth of the Hitler Wehrmacht in West Germany. They have rejected the Soviet suggestion that all four powers withdraw their troops from Germany. Despite the atubborn position taken by American diplomacy, 25X1 the Soviet government is still doing everything in its power to find a mutually acceptable solution of the problam of European security. Inasmuch as the western powers are not ready not to do away with the blocs, our government has suggested that a non-aggression pact be concluded between the NATO and 'Narsaw Pact countries, and that certain measures be implemented as a beginning. Although they do not embrace all aspects of the problem, these measures could lead to substantial progress. Perhaps, you have read about the Soviet government 25X1 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 3. disarmament statement of November 17, 1956. Among the measures suggested in that statement are: a one-third cut in the armed forces of the four great powers in ermany; the marked reduc- tion of American,. British and French forces stationed on the territories of the NATO countries, and of the Soviet forces stationed in the `'Warsaw Pact countries, and also the abolition of foreign military bases in the course of two years. These sugges- tions also provide of course for a suitable system-of control over the. implementation of these measures, including airphoto graphy in the areas where most of the NATO and Warsaw Pact forces are stationed. These suggestions tand good today, just as when they were made last autumn. We are holding to them because we believe they are the real key to the question of peace in Europe. They offer the only effective and radical solution to the wide problem of European security. 25X1 let us return to the part of your question in which you touched on the Soviet and American military budgests.1 The Fortune article of which you speak tries to prove that our economy is heavily burdened by huge military expenditures. The magazine makes this claim without any attempt at proof, and for reasons best known of it. But the truth of the matter is that our country's defense outlays look rather small compared to the military appropriations of the American, budget. In the U.S. budget, 63 per cent of experindires go for military purposes, whereas the Soviet Union has limited that item of expenditure to 16 per cent. This comparison in itself says a lot. And what has actually been taking place in the. Soviet Union in recent years ays eve125X1 more. Our country has made great economic strides Not only have our people reconstructed the cities, villages and Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 factories destroyed by the Nazis in the war, but they have brought our economy a long ways ahead. The general standard of living has been raised. They have mana,ed all this because our country has been pursuing a policy of peace and directing most of its resources for civilian and constructive needs. That is an intrinsic feature of our socialist development. Our economy is patterned not for arms races and rusing military expenditures, but for peaceful constructive work and the ultimate aim oi''which is a continued rise in the living standards of the people. That is That's where the real crux of the matter lies why we want tensions relaxed, arms cut, and peace ensured 25X1 throughout the world. Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 the 9th Program. Tonight our observer, Alexander Petrov, deals with his ninth question. "Russia As a rising country has many 25X1 openings for its youth. `What are the prospects of Russia's young people?" Here is Alexander Petrov. If you don't mind, I want to go back into Russian 25X1 history a little before answering that question. Back in 1920 the Young Communist League of Russia was having its third national congress in Moscow. The young soviet republic was still lying in ruins, after several years of. the "orld 'war and the civil war. Many delegates had come right from the front, as the fight against the foreign interventionists was still going on Russia's borders. The invaders, in collaboration with the internal counter-revolu- tionaries, were attempting to crush the Russian people's movement towards a new life with fire and the sword. I mention this congress because Vladimir Lenin, the leader of the revolution, made a never to be forgotten speech there. "Do you know what the task is now?" he asked the young delegates. Everyone thought he would talk about ending the war and restoring industry and transportation. But Lenin said simply, "your task is to study". He went on to explain that you can only become a Communist after you have enriched your mind with all the treasures produced by mankind. The young people, Alexander Petrov went on, realized what sage advice that was and enthusiastically threw themselves into their studies, although those were very difficult times and they were obliged to combine their studies with hard work. Lenin's behest became the main thing in the attitude of our state and society towards the youth, 25X1 Soviet power has only existed 40 years in this country, but see what amazing results it has obtained in the field of 25X1 The Soviet Union is the first country in the world where Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 - - -"_"` Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 2. all children receive a free, compulsory seven-year education and where the task of giving all young people a senior high school education free of charge is successfully being coped with. Basically the task will be solved by 1960. There is not a single educational establishment in this country where tuition fees are exacted. The Soviet Union has more college and technical stud(UNCODED than any other country in the world, including the United States. Most of them receive a monthly allowance from the government, which means that they do not have to 1^ok for work as a means of subsistence. The whole country is literally covered with a network of all kinds of educational establishments, beginning v,vith daytime schools and colleges and ending with young workers' schools, evening colleges, correspondence courses, and so on. The state and society are very solicitous of the young workers. Everyone between the age of 16 and 18, and older ones who study, havE a short working day, although they get the same pay as the other workers and office employees. They are also given many-other privileges, including time off with pay in which to take their examinations, in addition to the regular annual vacation, which is also paid. Thousands of clubs, stadi.Luns, water stations, tourists hotels, technical and nature lovers' stations and the like exist throughout the Soviet Union for the young people's benefit. Everyone takes an interest in the young people's education. They are imbued with humane ideals, a love of work, and respect for other nations and their culture. Our literature movies and theatre plays contain none of the obscenities, displays of hatred and disrespect for other nations and races or other perversions often found in your country) 25X1 We are noe enjoying the fruits of that education. Our country has had to overcome no small difficul.tiea in its march towards U 0 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 3. a life of abundance and happiness for all. It still has to open up new regions, build factories and sink mines in hitherto uninhabited areas, plough up virgin land, and so on. The young people are always the first to respond to the Soviet government's appeal for volunteers and they enthustiastically take their place in the front ranks of these modern pioneers. The last war, when the savage Nazi hordes treacherously attacked the Soviet Union, put a severe test on our people. When, too, our youth showed that they prize the things their fathers fought for and won. They spared neither, their forces nor their lives in the fight to smash the aggressor. Whether they were operating machines and tilling fields in the rear or fighting at the front and. in the partisan detachments, Soviet boys and girls displayed marvels of heroism. Many laid down their lives in the fight for their country. The Soviet youth confidently look to the future. 6ocialism ensures them an education, cork in their special field, and good, wholesome recreation. And they are doing their beat, along with the rest of the Soviet people, to multiply these opportunities. And now, before closing, I can't help mentioning the exceedingly friendly ?entiments which our young men and women nurture for boys and. girls of their own age in other lands. They l avant to see that friendship grow bigger and stronger, as the future to the youth. The sixth world festival of youth and students is goin- to be held in Moscow this summer. Guests will be coming in from all countries. There will be a big delegation from the United States). too. it would be fine if you could come with that group You would make the acquaintance of many Soviet boys and. 25X1 girls and they would tell you, better than I can over the radio, . about themselves and their plans, q 1 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 the 10th Program !?nd now we bring you our tenth and last broadcast in our series of answers by Moscow commentators to questions from I)GV^ an American listener His ,,ft question is: What type of exhibit is being planned 25X1 for the 1958 World's Fair in Brussels? I hope to attend and wonder what I can look forward to seeing. Here is what our commentator, Alexander Alexandrov, writes in answer to it. I quite understand your-interest in the coming Brussels Fair. ?ryi The last world fair was held almost two decades ago, ih 1939, in New York. Since the war there have been fairs and shows in no few countrie with many countries exhibiting at them, but they were not world fairs in the full sense of the word. The consequengm of the war and the period of cold-war following it were responsible for that. And so the Brussels Fair, which opens in April next year will be the first for a long time at which the peoples will be able to demonstrate their achievements in industry, science and culture, and exchange experience. Fifty some odd countries have announced that they will be taking part in it. including the United States and the Soviet Union. Preparations for it are already in full swing on five hundred acres of grounds in Heisel, a suburb of Brussels. Since there's a whole year ahead before the fair opens, the exhibitors have only made a general preliminary outline of .,That they intend to have on display. One thing that is certain, thourh is that scientific achievements will hold a leading place. Among other things, there is to be a very unusual structure at the fair called an atomium_. It will be in the form of an iron molecule enlarged 200 billion times. It will have nine spheres representing the atoms in the molecule, cor!nc=r-ted by tunes in Approved For Release 2008/11/12 : CIA-RDP80T00246A001700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 there will be escalators to take visitors up and down. On the too o'" the structure at a height of over three hundred feet, there ri ll be an observation platform. Each of the nine spheres will contain exhibits of one of the countries that have done the most towards iitulizing atomic energy for peaceful purposes. One of them will contain the Soviet exhibit. Science will also be centered in another pavilion -- a huge Palace of Ucience. The idea of this palace is to show the steady and inter-dependent development of science from the simpliest atom to the most complex systems. For that reason, it is to be divided into four sectors: the atom, which will have to do with questions of physics; the molecule, which will concern chemistry; the crystal, physics of solid bodies; and the living cell, biology. The work the scientists of many countries have done will also be demonstrated in the palace of science. The Soviet exhibits will illustrate, among other things, the Soviet Union's research in the sphere of organic compounds containing metals, chain reactions, and the use of isotopes in plant physiology. In addition to these international pavilions, each of the countries exhibiting at the fair will have its ovm pavilion. 25X1 I don't suppose that you expect me to describe the pavilions and exhibits of every country. For that reason, I'm only going to take up the'plans of the Soviet Union for the fair. The ceremony at which the cornerstone for the Soviet pavilion was laid took place in January. It will be one of the biggest at the fair, with a total of 1)376,000 square feet of floor space, and will be unique from the engineering standpoint. It will be 3,500 feet long and 82 feet high, and will be male of aluminum and glass. The whole of this. huge building will be suspended by means of invisible cables on sixteen slender columns. Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 The entrance to the building will be decorated 'ith a two hundred foot obelisk and a sculpture of stainless steel. But what will surprise the visitor When he gets to the top of the beautiful broad staircase leading into it? I think I am safe in saying that they will be surprised by everything that the peoples of our country have done in advancing their industry, engineering, science and culture. In answer to our reporter's questions, the manager of the Soviet pavilion, Alexander Nikiforov, said that the USSR would not strive for sensation for the sake of sensation. It intends to show itself as it is. The building of soviet society presents a wide choice of interesting subjects, Alexander Nikiforov said, and we'll be slecting themes from among them for the fair." The Soviet people have transformed their country from a-backward power to one o.,' the most advanced industrial powers in the world in just the few decades since the land-owner-capitalist order here was abolished. or that reason their biggest displays will be devoted to the country's raw- materials resources and the develo-ment of its industries. The exhibits will show the visitors to the fair the latest industrial methods used in the USSR its unique machines and apparatus, and developments in Soviet electronics, remote-control, supersonics, aviation and so on. That is not all that will be shown in the Soviet pavilion however, by any means. Among many other things, the visitors will get acquainted with Russian and Soviet painting, and they will be able to see Soviet films and see Soviet stage artists perform and hear Soviet musicians. Also, if they like, they will be able to try the national dishes of the peoples of the various republics of the USSR. Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7 -4. The way they're planning things now, the fair will be open for six or seven months, and about thirty-five million people are. expected to visit it. Just think hat a big part 25X1 the fair will play in increasing mutual understanding among nations. Those thirty-five million Russians, Americans, Arabs, Chinese and other people will be seeing each other's achievements qnd what they are doing. And that is a sure way to mutual confidence. I .have mentioned this because you and I have the same idea. You write in your letter of April 2 that if there were more exchange of opinion like that which hs taken place between you and Radio Moscow commentators, the need for arms would be cut by simple understanding. And that's a fact. This series of answers to your questions should show you how far from the truth` are the ideas about the USSR being spread by supporters of the cold war in the United States. True, this time, Fortune put it- self in a spot with the anti-Soviet articles you based your questions on and by means of which it was trying to show that the Soviet system was going through a crisis. Since it published them, it has had to 'take a slap in the face. the letter published in its April issue I have in mind which completely refutes the February articles 25X1 and calls them a poor service. But how many such poor services spoiling the relations between our peoples have been done by the American press and political leaders with impunity? As concerns means for counteracting propaganda, and the hatred of one country for another and of one people for another, which is so dangerous to all, the most reliable of them is to build up close international contacts in all spheres of human activity. Approved For Release 2008/11/12 : CIA-RDP80T00246AO01700410001-7
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https://foreignpolicy.com/2023/07/23/russia-ruble-money-putin-dictatorship-soviet-union-tsars-history/
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en
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How Dictators Make Money—and Money Makes Dictators
|
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[
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[
"Carey K. Mott",
"Adam Tooze",
"Alexey Kovalev",
"Steven A. Cook",
"Christina Bouri",
"Christina Lu",
"Robert E. Kelly",
"Paul Musgrave",
"Julian E. Zelizer"
] |
2023-07-23T00:00:00
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A new history of Russia’s ruble highlights the reciprocal relationship between autocracy and monetary policy.
|
en
|
Foreign Policy
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https://foreignpolicy.com/2023/07/23/russia-ruble-money-putin-dictatorship-soviet-union-tsars-history/
|
In a financialized world, can currencies shape geopolitics? Hardly a week passes without a pundit forecasting the future of the global order on the basis of subtle changes in the stock of currencies and gold stashed in central banks—as if a few more Chinese renminbi in South America, a little more gold in Asia, or the price of a virtual currency anticipates a world that is more democratic, autocratic, or libertarian. The same goes for broader trends, such as the growing share of Chinese renminbi and other forms of “autocratic money” in commodities trade, sovereign lending, and other global markets historically dominated by the West.
This punditry is not unwarranted. And yet punditry inevitably misses some crucial context—context that only fine-grained case studies can provide. Societies have always created currencies with a political function in mind—but the qualities of a currency, in turn, can also shape politics, both domestic and global. Ekaterina Pravilova’s The Ruble: A Political History persuasively offers Russia’s currency as a case study in the entanglement of money and power, and in so doing, encourages us to understand what catalyzes these global trends. A 200-year “biography of a currency,” the book positions the ruble as both an important part of imperial organization and an unexpected anchor of Soviet influence. The ruble also emerges, amid political and financial crisis, as a potential instrument of Russian democracy—yet its history ultimately demonstrates how a currency can become a primary tool for creating and maintaining an autocracy.
And while Russia’s singular monetary history has earned its economy a “backward” reputation, better known for profiting from geopolitical chaos than sound policy, it has also made the country a pioneer, leading it in a direction that many autocracies are headed today—namely, toward greater isolation from the West’s financial ecosystem. Whether that will also involve greater financial cooperation with other autocratic powers, including, as many anticipate, increased denomination of its trade and investment in China’s renminbi, depends on the Russian government’s conception of its own currency—and the related strength of its own autocracy.
When Russia first issued paper rubles in 1769, nobody considered these assignats to be real money. Catherine the Great implored Russians to trust the state, and so made these bills exchangeable for copper and silver coins stored in Assignat Banks. Before long, the expanding Russian empire demanded more paper, and Catherine supplied it in excess of the state’s stock of metal—that is to say, on credit. She vouched for assignats even amid inflation, and with no independent central bank to hold her accountable, their value depended on the sanctity of the sovereign’s word.
Assignats thus became Russia’s initial form of autocratic money, projecting Catherine’s absolute authority. At a time when the rest of Europe was demanding monetary accountability, Russia backed its currency’s value with its monarch’s “sublime power” rather than any material collateral. When Nicholas I reformed the system in 1839, replacing assignats with silver-based bills backed by the “entire patrimony of the state” rather than a mere personal promise, he intended to maintain this autocracy; indeed, the state’s wealth was not nearly sufficient to provide this support, given that it only had sufficient silver to back up one-sixth of the rubles in circulation. There was no way to actually redeem the entire nation’s wealth under these conditions: Unlike the gold reserves in Europe’s central banks, which were independent from their state’s treasury, Russia’s bullion reserve—representing the bulk of its tangible wealth—was the only one in Europe directly controlled by the state.
Liberal economists and intellectuals in Russia took issue with this lack of monetary independence. Inevitably, a monarch succumbs to the temptation to generate revenue by printing more money, leading to inflation. If money truly represented the nation’s wealth, as Nicholas I claimed, then the tsar should be prevented from destroying that wealth. Since the people bore the cost of the tsar’s excessive money printing, and they lacked political representation, the “people’s ruble” should be convertible—to gold, silver, or something else—and the state should not issue money beyond this wealth.
Where else would Russia get money? If the tsar couldn’t print it as needed, he’d have to take it from foreigners in exchange for Russia’s sovereignty.
Russian nationalists countered that convertibility impeded the tsar’s ability to finance wars that would expand the empire and defend Christian Orthodoxy. Where else would Russia get money? If the tsar couldn’t print it as needed, he’d have to take it from foreigners in exchange for Russia’s sovereignty. Having observed that the French monarchy’s large borrowing required it to cede power to its creditors, Russia avoided borrowing in any significant way until its 1877 war with Turkey. To some, its fiscal prudence had been a virtue—even leading U.S. diplomat Alexander Hill Everett to imagine a world in which Europe was united under Russia’s military, the only one not funded by public debt.
But Sergei Witte, a savvy bureaucrat who defined Russia’s monetary thinking in the 1890s, and the central figure in Pravilova’s history, agreed that backing the currency with gold was a good idea—but not because a gold standard forced the state to commit to rational monetary policy and limited its demands for cash, as liberals hoped. Rather, Witte believed that adopting gold would become a source of stability for the ruble and national pride for Russia; a necessary reassurance to foreign creditors; and, finally, admission to the club of economically civilized nations. Russia’s conservative faction thus spun the liberal idea of convertibility into the rhetoric of the monarchy.
In 1897, Russia, Europe’s only gold-producing country and claiming its largest bullion reserve, became the last major economy to join the gold standard. Witte’s gold-backed paper and small silver change was immediately unpopular among peasants, urbanites, and indigenous Russians alike. Billed as a necessary step toward modernity, Witte’s reform struck many as a return to a medieval economy. Some asked why a relatively poor European country was stockpiling gold, rather than spending it on, say, public education. “All of thinking Russia was against” it, Witte admitted, to the point that journalists in France, the country whose monetary thinking so influenced his plan, called it a “monetary coup d’état.”
Though a coup captures the reform’s dubious origins—Witte’s backroom dealings, a secret decree, and few administrative controls—this isn’t totally accurate. Russia managed to avoid the political revolutions that had forced many of Europe’s other gold standards. And as unpopular as the reform was with Russian citizens, it did please one important faction. According to one source, foreigners invested more capital in Russia in the year after Witte’s reform than the prior 40 years combined.
As its empire expanded, Russia became one of the most aggressive participants in capital markets, and Witte’s gold standard locked it in a vicious cycle: The bigger it became, the more money it needed to print or borrow, and the more gold it needed to hold in reserve. But the more it held in reserve, the less it had to spend, so the more it needed to print or borrow. Soon, Russia was borrowing gold abroad in order to sustain the rate at which it was printing gold-backed rubles, overlooking the fact that this cross-collateralized its bullion reserve, exposing it to both foreign and domestic creditors.
Most countries would simply suspend gold convertibility during war and issue fiat currency instead, but the size of Russia’s foreign debts prevented this. Revolutionaries, fed up with the state’s unaccountable, debt-funded budgets, called for an end to foreign borrowing at the expense of the Russian people. Hoping to expose the state’s insolvency, they circulated a manifesto, partly drafted by Leon Trotsky, that started a run on the regime. Depositors emptied their savings accounts, refusing to pay taxes or accept rubles for payment, while panicked creditors tried to offload Russian bonds.
The regime survived this financial crisis, but the revolution’s calls for political reform had some success: In 1905, Russia transitioned to a constitutional monarchy, and a year later elected its first legislature. However, the State Duma was given little power to separate the State Bank from the treasury, and the state maintained total monetary control.
Whereas, in the eyes of liberals and revolutionaries, the gold standard in other European countries signified true constitutionalism—political representation that demanded transparent financial policy—Russia’s gold policy was supposed to compensate for its lack of such assurances. But for Russians, the government’s rationale was a joke that, according to Vladimir Lenin, then an exiled Bolshevik leader, “made the entire world laugh.”
The viability of this unusual system was tested yet again during the First World War, which caused a race for gold that saw Russia pay unprecedented prices for it on foreign markets and led the state to call in all the country’s gold except the holiest Orthodox relics. “You’ve got a lot of gold trinkets,” read one official’s announcement, and “it is your patriotic duty to deliver all this useless luxury to the state.” Many of these trinkets were worth more in their original form than melted into gold bars. Some Russians, fearing seizure, melted their stashes of gold coins, the easier to carry them out of the country as newly crafted necklaces. The scheme netted only 655,000 rubles—enough for 13 days of wartime expenses.
World War I proved too much for Russia’s financial policy, and in 1914 it abandoned the gold standard. An income tax (which was transparent) and government bonds (which were voluntary) had replaced convertibility as the democratic mechanisms akin to a stake in Russia’s government, but they provided neither sufficient revenue to the state, nor adequate representation to the people.
Thus, even the Bolsheviks, so eager to eliminate money on the way to socialism, found that they still needed it, and generated revenue by printing rubles beyond anything seen by their imperial predecessors.
Thus, even the Bolsheviks, so eager to eliminate money on the way to socialism, found that they still needed it, and generated revenue by printing rubles beyond anything seen by their imperial predecessors. (The Bolshevik-created bureaucracy would soon employ three times as many officials as the imperial government.) Financing the government through monetary emission was not the Bolsheviks’ original plan, but central planning required coordination, and money helped organize resources. Soon, revolutionaries were simply trying to manage the ruble’s depreciation and maintain the state’s monopoly on money-printing.
Reflecting on these mishaps, the early Soviet state consulted a group of experts in 1920 to consider whether money should, in fact, exist under socialism. One participant, Vladimir Zheleznov, argued that money was the only language expressing social needs. To be sure, it represents a “compromise between personal freedom and social organization,” but Zheleznov suggested that each person has an economic interest—even under socialism—and this interest is expressed in money.
Zheleznov’s view, which drew on the Aristotelian concept of money (nomisma) as a tool of reciprocity among citizens, informed the Soviet Union’s New Economic Policy (NEP) in 1921. The NEP allowed citizens to keep money in any amount, replaced Soviet food requisitions with proper transparent taxes, and replaced the imperial ruble with a Soviet one. But just as ancient Greek currency became, over time, a tool for imperialism, the Soviet reform returned Russia to Witte’s imperial standard.
Lenin, like Witte, thought gold might attract foreign investors the way it had after 1897. And so the new treasury notes, which were backed by the state’s credit just like Nicholas I’s bills, circulated alongside bank notes ostensibly backed 25 percent by gold. But with its gold reserves impaired by the war effort (and its Gulag camps yet to properly restart gold mining in Siberia), Lenin’s forces had to raid the last stash of gold in the country, the coffers of the Orthodox church.
But even as it stockpiled gold, the state never actually sanctioned the ruble’s convertibility as promised. “If a certain Ivanov comes to [the] State Bank” demanding gold, said the people’s commissar of finance, then they would assume Ivanov is a counterrevolutionary hoping to buy “a little gold mug with the tsar’s portrait.” With so many unexchangeable rubles circulating, Russians once again saw convertibility as “a panacea for our economy,” but subsequent reforms in 1947 and 1961 did not grant monetary independence—according to Pravilova, they merely reaffirmed the political role of Soviet money as “an instrument of governance, propaganda, and Cold War diplomacy.”
Both imperial and Soviet governments meddled with the monetary system without changing the institutional and political foundations of Russia’s economy, nor fixing its fundamental problem: a lack of productivity. It is no wonder, then, that former Soviet states celebrated their independence by issuing their own national currencies.
Reflecting on Putin’s reign, Pravilova writes that the ruble has absorbed the cost of attacks on Chechnya, Georgia, Crimea, and Ukraine. Putin’s second invasion of Ukraine in 2022 rendered the ruble mostly inconvertible to Western currencies and limited Russia’s access to global finance. Once more, the ruble became a symbol of autocracy and autarky to the West, while its exchange rate prophesied Russia’s fate in its latest war. It is why Putin rushed to stabilize the ruble after the invasion, and why the Biden administration hastened to declare its sanctions on Russia had reduced the currency to “rubble.”
Several scholars have argued that money can play a role in creating and shaping democracy, and Pravilova demonstrates that powerful rulers can use the very same instruments to control the public and consolidate their autocracy. While most of Europe was democratizing and developing the modern toolkit of central banking, Russia managed domestic crisis by changing the ruble’s form, value, or metallic backing, often in lieu of political reform. By designing a currency that maintains autocracy, true monetary accountability will remain beyond the public’s reach.
Once more, the ruble became a symbol of autocracy and autarky to the West, while its exchange rate prophesied Russia’s fate in its latest war.
Before Russia’s gold standard was co-opted by monarchists for the sake of securing foreign credit, it was a way for liberals to demand government accountability under a regime that did not offer true political representation for its people. This concept was always undermined by a lack of monetary independence in Russia, which became liberals’ second major demand for accountability. The ruble remains one of many marginal currencies—occasionally sanctioned, constantly fluctuating, and rarely circulating outside trade alliances—issued by autocrats hoping to retain the centrality of the state over the monetary system.
From Turkish President Recep Tayyip Erdogan’s historically inflationary policies to Indian Prime Minister Narendra Modi’s unilateral seizure of rupees, Putin is far from the only ruler forcing the costs of his regime on citizens who lack proper representation. Some of these rulers have sought new means to defend their autocratic model and challenge the U.S. dollar network with monetary symbols of their authority.
Today, autocratic countries make more than half of the world’s gold purchases, some of which insulate their economies from Western meddling or back trade-oriented cryptocurrencies. Broader currency alliances aim to directly challenge the dollar standard, but attempts in Latin America and other emerging markets have crumbled for lack of a stable keystone currency.
China’s renminbi may be the politically aligned alternative they seek. About 2.5 percent of foreign official currency reserves are held in renminbi, with almost one-third of that amount owned by Russia alone. Chinese President Xi Jinping’s capital controls make the renminbi’s convertibility into Western currencies doubtful, limiting its utility for now. A larger alliance of smaller currencies allays some of that concern, but it also means that, as in imperial Russia, it is the autocrat’s promise that backs up the renminbi, and financial stability depends on his goodwill.
Faced with this prospect, The Ruble contributes to a recently reinvigorated debate: What is money? Is it a mechanism of exchange and credit, or a tool of governance and coercion? A check on autocratic power or a symbol of that power? The ruble’s role at the center of crisis and reform shows that it could be all these things, or none of them. After all, currency not only reflects the political order—it actively shapes it.
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https://en.wikipedia.org/wiki/Soviet_ruble
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Soviet ruble
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https://en.wikipedia.org/wiki/Soviet_ruble
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Currency of the Soviet Union
RublePубль (Russian)
14 other official names
карбованець (Ukrainian)
сўм (Uzbek)
сом (Kazakh)
рубель (Belarusian)
манат (Azerbaijani)
მანეთი (Georgian)
сӯм (Tajik)
рублэ (Romanian)
сом (Kyrgyz)
rublis (Lithuanian)
манат (Turkmen)
ռուբլի (Armenian)
rublis (Latvian)
rubla (Estonian)
ISO 4217CodeSURUnitPluralrubli (nom. pl.), rubley (gen. pl.)Symbolруб or р (in Cyrillic)
Rbl/Rbls[1][2] or R[3] (in Latin)DenominationsSubunit 1⁄100kopeck (копейка)Plural kopeck (копейка)kopeyki (nom. pl.), kopeyek (gen. pl.)Symbol kopeck (копейка)коп. or к. in Cyrillic
kop., cop. or k (in Latin)BanknotesRbl 1, Rbls 3, Rbls 5, Rbls 10, Rbls 25, Rbls 50, Rbls 100, Rbls 200, Rbls 500, Rbls 1,000Coins1 kop, 2 kop, 3 kop, 5 kop, 10 kop, 15 kop, 20 kop, 50 kop, Rbl 1, Rbls 3, Rbls 5, Rbls 10DemographicsDate of introduction1922ReplacedImperial Russian rubleDate of withdrawal1992–1994Replaced bysee belowUser(s)
1922–1991:
Soviet Union
until 1994:[4]
Tajikistan
IssuanceCentral bankState Bank of the Soviet UnionPrinterGoznakMintLeningrad (1921–1941; 1946–1991)
Krasnokamsk (1941–46)
Moscow (1982–1991)This infobox shows the latest status before this currency was rendered obsolete.
The ruble or rouble ( ; Russian: рубль, romanized: rubl', IPA: [rublʲ]) was the currency of the Soviet Union. It was introduced in 1922 and replaced the Imperial Russian ruble. One ruble was divided into 100 kopecks (копейка, pl. копейки – kopeyka, kopeyki). Soviet banknotes and coins were produced by the Federal State Unitary Enterprise (or Goznak) in Moscow and Leningrad.
In addition to regular cash rubles, other types of rubles were also issued, such as several forms of convertible ruble, transferable ruble, clearing ruble, Vneshtorgbank cheque, etc.; also, several forms of virtual rubles (called "cashless ruble", безналичный рубль) were used for inter-enterprise accounting and international settlement in the Comecon zone.[5]
In 1991, after the dissolution of the Soviet Union, the Soviet ruble continued to be used in the post-Soviet states, forming a "ruble zone", until it was replaced with the Russian ruble in September 1993.
Etymology
[edit]
Main article: Ruble
The word ruble is derived from the Slavic verb рубить, rubit', i.e., 'to chop'. Historically, a "ruble" was a piece of a certain weight chopped off a silver ingot (grivna), hence the name.
The word kopeck or copeck (in Russian: копейка kopeyka) is a diminutive form of the Russian kop'yo (копьё)—a spear. The reason for this is that a horseman armed with a spear was stamped on one of the faces of the coin. The first kopeck coins, minted at Novgorod and Pskov from about 1534 onwards, show a horseman with a spear. From the 1540s onwards the horseman bears a crown, and doubtless the intention was to represent Ivan the Terrible, who was Grand Prince of all Russia until 1547, and Tsar thereafter. Subsequent mintings of the coin, starting in the 18th century, bear instead Saint George striking down a serpent.
Ruble in the Soviet Union
[edit]
The Soviet currency had its own name in all the languages of the Soviet Union, often different from its Russian designation. All banknotes had the currency name and their nominal printed in the languages of every Soviet Republic. This naming is preserved in modern Russia; for example: Tatar for 'ruble' and 'kopeck' are сум (sum) and тиен (tiyen). The current names of several currencies of Central Asia are simply the local names of the ruble. Finnish last appeared on 1947 banknotes since the Karelo-Finnish SSR was dissolved in 1956.
The name of the currency in the languages of the fifteen republics, in the order they appeared in the banknotes:
Language In local language IPA Transcription ruble kopeck ruble kopeck Russian рубль копейка [ˈrublʲ] ⓘ [kɐˈpʲejkə] ⓘ Belarusian рубель капейка [ˈrubʲɛlʲ] [kaˈpʲɛjka] ⓘ Ukrainian карбованець копійка [kɐrˈbovɑnet͡sʲ] ⓘ [koˈpijkɐ] ⓘ Uzbek сўм тийин [som] [tijin] Kazakh сом тиын [swʊm] [tɪjən] Kyrgyz сом тыйын [som] [ˈtɯjɯn] Tajik сӯм тин [sɵm] [tin] Georgian მანეთი კაპიკი [manetʰi] [kʼapʼikʼi] Azerbaijani манат гәпик [mɑnɑt] [ɡæpik] Turkmen манат көпүк [mɑnɑt] [kœpʏk] Lithuanian rublis kapeika [ˈrʊbɫɪs] [kɐˈpɛɪkɐ] Latvian rublis kapeika [ˈrublis] [ˈkapɛika] Estonian rubla kopikas [ˈrublɑ] [ˈkopikɑs] Finnish rupla kopeekka [ˈruplɑ] [ˈkopeːkːɑ] Romanian рублэ/rublă копейкэ/copeică [ˈrublə] [koˈpejkə] Armenian ռուբլի կոպեկ [ˈrubli] [ˈkɔpɛk]
Note that the scripts for Uzbek, Azerbaijani, Turkmen and gradually Kazakh have switched from Cyrillic to Latin since the breakup of the Soviet Union. Moldovan has switched to Latin and is once again referred to as Romanian.
These fifteen names derive from four roots:
Slavic verb рубить, rubit', "chop"
Turkic root som, "pure"
Latin monēta, "coin"
Old Ruthenian karbuvaty, "carve", "emboss", "mint"
Historical Soviet rubles
[edit]
First Soviet ruble (paper), 1917–1922
[edit]
The first ruble issued for the Soviet government was a preliminary issue still based on the previous issue of the ruble prior to the Russian Revolution of 1917. They are all in banknote form and started their issue in 1919. At this time other issues were made by the white Russian government and other governing bodies. During that time, the Russian economy suffered from hyperinflation.
Denominations were as follows: 1, 2, 3, 5, 10, 15, 25, 50, 60, 100, 250, 500, 1,000, 5,000, 10,000, 25,000, 50,000, and 100,000 rubles. Short-term treasury certificates were also issued to supplement banknote issue in 1,000,000, 5,000,000, and 10,000,000 rubles. These issue was printed in various fashions, as inflation crept up the security features were few and some were printed on one side, as was the case for the German inflationary notes.
Banknotes: In 1918, state credit notes were introduced by the RSFSR for 1, 3, 5, 10, 25, 50, 100, 250 Rbls, 500 Rbls, 1,000 Rbls, 5,000 Rbls, and 10,000 rubles. These were followed in 1919 by currency notes for 1, 2, 3, 15, 20, 60, 100, 250, 500, 1,000, 5,000, and 10,000 rubles. In 1921, currency note denominations of 5, 50, 25,000, 50,000, 100,000, 1,000,000, 5,000,000, and 10,000,000 rubles were added.
Gold ruble (chervonets), 1921–1924
[edit]
Upon launch of the New Economic Policy in 1921 came efforts to revive as currency and accounting unit the pre-war gold standard ruble, equal to 1⁄10 of a chervonets (with Rbls 10. equal to 8.602 g of 90% fine gold, then equal to US$5.14).[6] The gold ruble existed in parallel with the paper ruble of 1917–1922, which continued to depreciate versus the former, climbing to 50 billion paper rubles per gold ruble in March 1924.
Coins: The first coinage after the Russian Civil War was minted in 1921–1923 according to pre-war Czarist standards, with silver coins of 10 kop, 15 kop, 20 kop minted in 50% silver, 50 kop ("poltinnik" or Rbl 1⁄2) and Rbl 1 in 90% silver, and Rbls 10 (chervonets) in 90% gold. These coins bore the emblem and legends of the RSFSR (Russian Soviet Federative Socialist Republic) and depicted the famous slogan, "Workers of the world, Unite!". These coins would continue to circulate after the RSFSR was consolidated into the USSR with other Soviet Republics until the discontinuation of silver coinage in 1931.
Third Soviet ruble, 1 January 1923 – 6 March 1924
[edit]
The third Soviet ruble was issued equal to 1,000,000 paper rubles of 1917–1922, simply to handle the unwieldiness over the number of digits in the first currency. Again it continued to depreciate versus the gold ruble until the latter climbed to Rbls 50,000 in 1924. Only paper money was issued, in the form of state currency notes in denominations of 50 kopecks and 1, 5, 10, 25, 50, 100, 250, 500, 1,000, 5,000, and 10,000 rubles.
In early 1924, just before the next redenomination, the first paper money was issued in the name of the USSR, featuring the state emblem with six bands around the wheat, representing the languages of the then four constituent republics of the Union: Russian SFSR, Transcaucasian SFSR (Azerbaijani, Armenian, and Georgian), Ukrainian SSR and Byelorussian SSR. They were dated 1923 and were in denominations of Rbls 10,000, Rbls 15,000, and Rbls 25,000.
Fourth Soviet ruble, 7 March 1924 – 1947
[edit]
After Joseph Stalin's consolidation of power following the death of Lenin, a final redenomination occurred which replaced all previously issued currencies. The fourth Soviet ruble was equal to 50,000 rubles of the third issue, or 50 billion paper rubles of the first issue, and began at par with the gold ruble (1⁄10 chervonets). It built on the stability in the exchange value of the third ruble which happened towards the end of 1923.[6]
Coins began to be issued again in 1924, while paper money was issued in rubles for values below 10 rubles and in chervonets for higher denominations. No chervonets were issued in gold, just decrees on the parity of circulating rubles with the gold ruble, which already failed to take hold as early as 1925.
Coins, 1924–1961
[edit]
In 1924, copper and silver coins were again minted to pre-war Czarist standards, in denominations of 1⁄2 kop, 1 kop, 2 kop, 3 kop, and 5 kop (copper), 10 kop, 15 kop, and 20 kop (in 50% silver), and 50 kop, and Rbl 1 (in 90% silver). From this issue onward, the coins were minted in the name of the USSR (Union of the Soviet Socialist Republics). The "Workers of the World" slogan was carried forward. Coins issued 1921–1923 representing the gold ruble continued to circulate at par with this post-1924 ruble.
Copper coins were minted in two types; plain edge and reeded edge, with the plain-edged types being the fewest in number. The 1 Rbl coin was only issued in 1924, the poltinnik (or Rbl 1⁄2) was issued 1924–27, and the denga (or 1⁄2 kopeck) was issued 1925–28. In 1926, smaller aluminium-bronze coins were minted to replace the large copper 1 kop, 2 kop, 3 kop, and 5 kop coins, but were not released until 1928. The larger coins were then melted down.
Stalin failed to maintain the ruble's value versus the gold ruble as early as 1925, and by 1930 its value even struggled to stay above the melt value of the silver 10, 15, and 20 kop coins. Soviet authorities scapegoated "hoarders" and "exchange speculators" as responsible for the shortages, and confiscatory measures were taken. In 1931, the remaining silver coins were replaced with redesigned cupro-nickel coins depicting a male worker holding up a shield which contained the denominations of each. All silver coins were to be returned and melted down.
1926 and 1931 issues Image Value Diameter Mass Minted 1 kop 15 1 1926–1935 2 kop 18 2 1926–1935 3 kop 22 3 1926–1935 5 kop 25 5 1926–1935 10 kop 17,27 1,8 1931–1934 15 kop 19,56 2,7 1931–1934 20 kop 21,84 3,6 1931–1934
In 1935, the reverse of the 10, 15, and 20 kopeck coins were redesigned again with a simpler Art Decor-inspired design, with the obverse of all denominations also redesigned, having the "Workers of the world, unite!" slogan dropped. The change of the obverse designs did not affect all 1 kop, 2 kop, 3 kop, and 5 kop coins immediately, as some 1935 issues bore the "Workers of the World" design while some bore the new "CCCP" design. The state emblem also went through a series of changes between 1935 and 1957 as new Soviet republics were added or created, this can be noted by the number of "ribbons" wrapped around the wheat sheaves. This coin series remained in circulation during and after the monetary reform of 1947 and was finally discontinued in 1961.
1935 issue Image Value Diameter Mass Minting 1 kop 15 1 1935–1941
1945–1946 1948–1957
2 kop 18 2 1935–1941
1945–1946 1948–1957
3 kop 22 3 1935–1941 1943
1945–1946 1948–1957
5 kop 25 5 1935–1941 1943
1945–1946 1948–1957
10 kop 17,27 1,8 1935–1946
1948–1957
15 kop 19,56 2,7 1935–1946
1948–1957
20 kop 21,84 3,6 1935–1946
1948–1957
In August 1941, the wartime emergency prompted the minting facilities to be evacuated from the Neva district in Moscow and relocated to Permskaya Oblast as German forces continued to advance eastward. It only became possible to resume coin production in the autumn of 1942, for one year the country was using coins made before the war. Furthermore, the coins were made of what had suddenly become precious metals – copper and nickel, which were needed for the defense industry. This meant many coins were being produced in only limited quantities, with some denominations being skipped altogether until the crisis finally abated in late 1944. These disruptions led to severe coin shortages in many regions. Limits were put in place on how much change could be carried in coins with limits of 3 Rbls for individuals and 10 Rbls for vendors to prevent hoarding as coins became increasingly high in demand. Only high inflation and wartime rationing helped ease pressure significantly. In some instances, postage stamps and coupons were being used in place of small denomination coins. It was not until 1947 that there were finally enough coins in circulation to meet economic demand and restrictions could be eased.
Banknotes, 1924–1947
[edit]
In 1924, state currency notes were introduced for 1, 3, and 5 gold rubles (рубль золотом). These circulated alongside the chervonets (чрв) notes introduced in 1922 by the State Bank in denominations of 1 чрв, 3 чрв, 5 чрв, 10 чрв, and 25 чрв. State Treasury notes replaced the state currency notes after 1928. In 1938, new notes were issued for Rbl 1, Rbls 3, and Rbls 5, dropping the word "gold".
1938 Series Image Denomination Obverse Reverse Rbl 1 Miner Rbls 3 Soldiers Rbls 5 Pilot 1 чрв Lenin 3 чрв 5 чрв 10 чрв
Fifth Soviet ruble, 1947–1961
[edit]
Following World War II, the Soviet government implemented a confiscatory redenomination of its currency (decreed on December 14, 1947) to reduce the amount of money in circulation. The main purpose of this change was to prevent peasants who had accumulated cash by selling food at wartime prices from using this to buy consumer goods as the postwar recovery took hold.[7] Old rubles were revalued at one tenth of their face value. This mainly affected paper money in the hands of private individuals. Amounts of Rbls 3,000 or less in individual private bank accounts were not revalued, while salaries remained the same. This revaluation coincided with the end of wartime rationing and efforts to lower prices and curtail inflation, though the effects in some cases actually resulted in higher inflation. Unlike other reforms, this one did not affect coins.
Banknotes
[edit]
In 1947, State Treasury notes were introduced in denominations of Rbls 1, Rbls 3, and Rbls 5, along with State Bank notes for denominations of Rbls 10, Rbls 25, Rbls 50, and Rbls 100. The State Bank notes depicted Lenin while the Treasury notes depicted floral artistic designs. All denominations were colored and patterned in a similar fashion to late Czarist notes.
In 1957, all these notes were reissued with the old date but modified design: because of the abolition of the Karelo-Finnish SSR, the number of ribbons on the state emblem was reduced from 16 to 15, and the nominal in Finnish was removed from the obverse.
1947 Series Image Denomination Obverse Reverse Rbl 1 State Emblem of the Soviet Union Rbls 3 Rbls 5 Rbls 10 Vladimir Lenin Rbls 25 Rbls 50 Rbls 100 Moscow Kremlin
Sixth Soviet ruble, 1961–1991, (Identified as ISO code SUR)
[edit]
The 1961 redenomination introduced 1 new ruble equal to 10 old rubles and restated all wages, prices and financial records into new rubles. It differed from the confiscatory nature of the 1947 reform when banknotes were reduced to 1⁄10 of their value but wages and prices remained the same.[8] Its parity to the US dollar underwent a devaluation, however, from US$1 = 4 old rubles (0.4 new ruble) to US$1 = 0.9 new ruble (or 90 kopecks). It implies a gold parity of Rbls 31.50 per troy ounce or Rbl 1 = 0.987412 gram of gold, but this exchange for gold was never available to the general public. Banknotes and coins of this series were designed by Ivan Dubasov.
Coins
[edit]
The 1958 pattern series: by 1958, plans for a monetary reform were underway and a number of coin pattern designs were being experimented with before implementation. The most notable of these was the 1958 series, in denominations of 1 kop, 2 kop, 3 kop, and 5 kop in copper-zinc, and 10 kop, 15 kop, 20 kop, and 50 kop, and Rbl 1, Rbls 3, and Rbls 5 in copper nickel. These coins all had the same basic design and became the most likely for release. Indeed, they were mass-produced before the plan was scrapped and a majority of them were melted down. During this time, 1957 coins would continue to be restruck off old dies until the new coin series was officially released in 1961. This series is considered the most valuable of Soviet issues due to their scarcity.
On 1 January 1961, the currency was revalued again at a rate of 10:1, but this time a new coinage was introduced in denominations of 1 kop, 2 kop, 3 kop, and 5 kop in aluminium-bronze, and 10 kop, 15 kop, 20 kop, and 50 kop and 1 Rbl in cupro-nickel-zinc. Like previous issues, the front featured the state arms and title while the back depicted date and denomination. The 50 kop. and Rbl 1 coins dated 1961 had plain edges, but starting in 1964, the edges were lettered with the denomination and date. All 1926–1957 coins were then withdrawn from circulation and demonetized, with the majority melted down.
Commemorative coins of the Soviet Union: in 1965, the first circulation commemorative ruble coin was released celebrating the 20th anniversary of the Soviet Union's victory over Nazi Germany, during this year the first uncirculated mint-coin sets were also released and restrictions on coin collecting were eased. In 1967, a commemorative series of 10 kop, 15 kop, 20 kop, 50 kop, and Rbl 1 coins was released, celebrating the 50th anniversary of the Russian Revolution and depicted Lenin and various socialist achievements. The smaller bronze denominations for that year remained unchanged. Many different circulation commemorative 1 Rbl. coins were also released, as well as a handful of Rbls 3 and Rbls 5 over the years. Commemorative coins from this period were always slightly larger than general issues, 50 kop and Rbl 1 coins in particular were larger, while the 1967 series of the small denominations were the same circumference but thicker than general issues.
Initially, commemorative rubles were struck in the same alloy as other circulating coins until 1975, when its composition was changed to higher-quality copper-nickel with zinc excluded. Its specifications (31 mm diameter, 12.8 grams) were nearly identical to those of the 5-Swiss franc coin (31.45 mm, 13.2 g, cupronickel) worth approx. €4.39 or US$5.09 as of August 2018, resulting in the large scale use of (now worthless) Soviet commemorative coins to defraud automated vending machines in Switzerland years after they have been demonetized.[9]
Starting in 1991 with the final year of the 1961 coin series, both kopeck and ruble coins began depicting the mint marks (М) for Moscow, and (Л) for Leningrad.
1961 issue Image Value Diameter Mass Issued 1 kop 15 1 1961–1991 2 kop 18 2 1961–1991 3 kop 22 3 1961–1962
1965–1991
5 kop 25 5 1961–1962
1965–1991
10 kop 17,27 1,8 1961–1962
1965–1991
15 kop 19,56 2,5 1961–1962
1965–1991
20 kop 21,8 3,4 1961–1962
1965–1991
50 kop 24 4,4 1961
1964–1991
Rbl 1 27 7,5 1961
1964–1991
Banknotes
[edit]
Banknotes were issued by the USSR State Treasury (Государственный казначейский билет, Gosudarstvenny kaznacheyskiy bilet) in denominations of Rbl 1, Rbls 3 and Rbls 5, and by the USSR State Bank (билет Государственного банка, Bilet gosudarstvennogo banka) in denominations of Rbls 10, Rbls 25, Rbls 50 and Rbls 100. Colors are similar to the previous series but notes were much smaller in size.
1961 Series Image Value Watermark Withdrawn Obverse Reverse Rbl 1 dark and light
5-pointed stars
December 31, 1993 Rbls 3 Rbls 5 Rbls 10 Rbls 25 July 26, 1993 Rbls 50 Face of Lenin January 23, 1991 Rbls 100
1989 Unreleased Soviet Rubles
[edit]
After the failed project of making the 50th anniversary banknotes for 1967,[10] the projects for the 30 ruble in 1988 were worked out in Goznak. The first ruble that was projected as an example of the 1967 project, breaking with old Soviet tradition. They decided to put other faces which in the first note was Tsiolkovsky's statue. For unknown reasons it was cancelled and archived in the "failed projects" archive with barely any prints after a debate around the prototype of the note. At the same time they tried to adopt a more traditional 30 Soviet ruble banknote which replaced the whole face-project with the Kremlin Tower. Although the project was already started in 1988 and was finalized in 1989, it had some potential and intention to be adopted but the Gosbank decided to not put in practice and was cancelled. Even in 1988, a lot of projects were started with the Tsiolkovsky monument banknotes but were never recovered and was certainly rejected as a proposal and only the 30 note remained while other variations got lost.
"Central Bank of Russia" project (1990)
[edit]
The whole concept was to adopt a new Soviet ruble under the "Central Bank of Russia" which is still questioned. Although, there aren't only one type of banknotes and some of these prototype notes were discovered in different places, even though its authenticity is still questioned as of one of the most outstanding banknotes of this (20, representing M.N Kutuzov)[11] series also becoming one of the most controversial ones because it was found in a professional banknote collector's album, as it was randomly discovered. The whole project was canceled because the name "Central Bank of Russia" and the different faces caused a lot of outrage as it was promoted as "Russian" and not Soviet, and was not promoting Lenin's head and tried to build up a totally whole new concept around the new 1991 series.[10]
1991 Forgotten Soviet banknote project
[edit]
In 1989, designers sat at a table to draw a new type of Soviet banknote which represented buildings rather than people. Only the 1 and 2 ruble notes were designed. The 2 ruble note was designed in 1989 and could have been released in 1991. It was a very unusual sketch that combines the working man and the Kremlin as the whole unity of the country, the banknotes was drawn by V.K Nikitin. The 1 ruble note was designed back in 1989 by I.S Krylov and was planned to be released in 1991. The artist was chief of the artists of Goznak, one of the creators of the Soviet ruble banknotes between 1947 and 1991. He also painted a number of postage stamps in the same period.[12]
Seventh Soviet ruble, 1991–1993
[edit]
The Monetary Reform of 1991 was carried out by Mikhail Gorbachev and was known also as the Pavlov Reform. It was the last of such in the Soviet Union and began on January 22, 1991. Its architect was Minister of Finance Valentin Pavlov, who also became the last prime minister of the Soviet Union. The details included a brief period to exchange old 1961-dated Rbls 50. and Rbls 100 notes for new 1991 notes — for three days from 23 to 25 January (Wednesday to Friday) and with a specific limit of no more than Rbls 1,000 per person—the ability to exchange other notes considered in the special commissions to the end of March 1991. See Monetary reform in the Soviet Union, 1991.
Coins
[edit]
In late 1991, a new coinage was issued as direct obligations of the USSR State Bank in denominations of 10 kop and 50 kop, and Rbl 1, Rbls 5, and Rbls 10. The 10 kop coin was struck in brass-plated steel, the 50 kop coin, and Rbl 1 and Rbls 5 coins were in cupro-nickel. The Rbls 10 coin was bimetallic with an aluminium-bronze centre and a cupro-nickel-zinc ring. The series depicts an image of the Kremlin on the obverse rather than the Soviet state emblem. However, this coin series was extremely short-lived as the Soviet Union ceased to exist only months after its release. It did, however, continue to be used in several former Soviet republics including Russia and particularly Tajikistan for a short time after the union had ceased to exist out of necessity.
Banknotes
[edit]
New 1991-dated banknotes were all issued as USSR State Bank notes (including the 1, 3, and 5-ruble denominations), with nearly identical colours and size for all denominations, but included more colour and heightened security features. The 25 Rbl note was omitted from this series, but still remained legal tender; all 1961 notes apart from the demonetized Rbls 50 and Rbls 100 denominations remained in circulation. An important modification of the design included the removal of the texts in languages of other Soviet republics (i.e. all texts were in Russian only) in the 1992 issues; all 1991 notes (in exception to the 2nd 1991 Rbls 100 banknote) contained all Soviet languages. In this series, Rbl 1. notes were issued on 27 June 1991, Rbls 3 notes on 3 November 1991, Rbls 5. notes on 5 July 1991, Rbls 10 notes on 10 July 1991, Rbls 50 and Rbls 100 notes on 23 January 1991, Rbls 200 notes on 29 October 1991, and Rbls 500 notes on 24 December 1991. Rbls 1,000 notes were issued in March 1992, after the Soviet collapse. New 1992-dated notes, similar in appearance to the 1991 issues, were printed in denominations of Rbls 50–1,000. bearing the Soviet state emblem and name. A notable exception was that the more-colourful Rbls 100. note of this series was still dated 1991 unlike the others.
After the breakup of the Soviet Union, many newly independent republics chose to continue circulating Soviet rubles even after the introduction of the new Russian ruble in 1992.
1991 Series Image Value Watermark Issued Withdrawn Obverse Reverse Rbl 1 5-pointed stars
and wavy stripes
27 June 1991 31 December 1993 Rbls 3 3 November 1991 Rbls 5 5 July 1991 Rbls 10 dark and light
5-pointed stars
10 July 1991 Rbls 50 Face of Lenin 23 January 1991 26 July 1993 Rbls 100 Rbls 200 30 November 1991 Rbls 500 24 December 1991 Rbls 1,000 19 March 1992
1992 Soviet rubles
[edit]
After the collapse of the Soviet Union, new banknotes were implemented using the old 1991 model even after the collapse. These are stamped with a denomination symbol and all languages of the former union were removed except Russian language. Even after the USSR ceased to exist, it was still titled as the money of the USSR. These were temporary issues as already in the same year, new notes were implemented. After the Monetary Reform of 1993, these notes were out of circulation and were free to exchange with the new 1993 issues.
1992 Series Image Value Watermark Issued Withdrawn Obverse Reverse Rbls 50 5-pointed stars
and wavy stripes
July 1, 1992 26 July 1993 Rbls 100 dark and light
5-pointed stars
March 4, 1992 Rbls 200 5-pointed stars
and wavy stripes
July 1, 1992 Rbls 500 dark and light
5-pointed stars
Rbls 1000
Economic role
[edit]
The Soviet Union ran a planned economy, where the government controlled prices and the exchange of currency. Thus the Soviet ruble did not function like a currency in a market economy, because mechanisms other than currency, such as centrally planned quotas, controlled the distribution of goods. Consequently, the ruble did not have the utility of a true currency; instead, it more resembled the scrip issued in a truck system. Soviet citizens could freely purchase a set of goods from state shops with rubles, but choice was limited and prices were always political decisions, having no direct connection to manufacturing cost. Bread and public transport were heavily subsidised, but wages were low and there were shortages of manufactured consumer goods, implementing hidden taxes.[13] It was common to hold large savings in rubles in the State Labor Savings Banks System of the USSR because credit was not available. Special rubles used in accounting were not exchangeable to cash, and were effectively different currency units pegged to the ruble. The currency was not freely exchangeable and its export was illegal. In bilateral trade, a separate, non-convertible "clearing ruble" credit was used.[14] There were separate shops (Beriozka) for purchasing goods obtained with hard currencies. However, Soviet citizens could not legally own foreign currency. Thus, if they legally received payment in foreign currency, they were forced to convert it to Vneshposyltorg cheques at a rate set by the government. These cheques could be spent at a Beriozka. The sudden transformation from a Soviet "non-currency" into a market currency contributed to the economic hardship following the dissolution of the Soviet Union in December 1991.[13][15][16]
Exchange rates
[edit]
The Soviet Union officially valued the ruble in the planned economy at an average of US$1.35 (or Rbl 0.74 per US dollar; see below) from 1971 to 1988. However, as the ruble was not internationally exchangeable and as Soviet citizens could not legally own foreign currency, rubles changed hands in the black market at an average of Rbls 4.14 per dollar in the same period 1971–88.[17] The opening up of the economy in the late 1980s under perestroika resulted in the recognition of more realistic exchange rates for the ruble, as follows:
In November 1989 the ruble was devalued for foreign travel to a tourist rate of Rbls 6.26 per dollar (versus Rbl 0.6277 officially).[18]
In November 1990 a new commercial exchange rate of Rbls 1.80 per dollar was introduced. During this time, however, black market dollars changed hands at 20 Rbls.[19]
In April 1991, following the failed monetary reform of 1991, the tourist exchange rate was raised significantly to Rbls 27.60 per dollar, making the average monthly Soviet salary of Rbls 330 worth only $12 on the international market.[20]
Further pain would continue later that year with the dollar changing hands at Rbls 35-40 on the black market and Rbls 45-70 in government auctions as of October 1991.[21]
By early December 1991, just before the Soviet Union ceased to exist, the ruble was valued at nearly Rbls 100 to the dollar.[22]
Official exchange rates Soviet ruble of the time per United States dollar:[23]
Date Rbls of the time per US$ US$ per Rbl of the time 1924-01-01 Rbls 2.2000 $0.4545 1924-04-01 Rbls 1.9405 $0.5153 1927-01-01 Rbls 1.9450 $0.5141 1928-02-01 Rbls 1.9434 $0.5145 1933-04-01 Rbls 1.9434 $0.5145 1933-05-01 Rbls 1.7474 $0.5722 1934-01-01 Rbls 1.2434 $0.8042 1935-01-01 Rbls 1.1509 $0.8689 1936-01-01 Rbls 1.1516 $0.8684 1937-01-01 Rbls 5.0400 $0.1984 1937-07-19 Rbls 5.3000 $0.1887 1950-02-01 Rbls 5.3000 $0.1887 1950-03-01 Rbls 4.0000 $0.2500 1960-12-01 Rbls 4.0000 $0.2500 1961-01-01 Rbl 0.9000 $1.1111 1971-12-01 Rbl 0.9000 $1.1111 1972-01-01 Rbl 0.8290 $1.2063 1973-01-01 Rbl 0.8260 $1.2107 1974-01-01 Rbl 0.7536 $1.3270 1975-01-01 Rbl 0.7300 $1.3699 1976-01-01 Rbl 0.7580 $1.3193 1977-01-01 Rbl 0.7420 $1.3477 1978-01-01 Rbl 0.7060 $1.4164 1979-01-01 Rbl 0.6590 $1.5175 1980-01-03 Rbl 0.6395 $1.5637 1981-01-01 Rbl 0.6750 $1.4815 1982-01-01 Rbl 0.7080 $1.4124 1983-01-13 Rbl 0.7070 $1.4144 1984-01-01 Rbl 0.7910 $1.2642 1985-02-28 Rbl 0.9200 $1.0870 1986-01-01 Rbl 0.7585 $1.3184 1987-01-01 Rbl 0.6700 $1.4925 1988-01-06 Rbl 0.5804 $1.7229 1989-01-04 Rbl 0.6059 $1.6504 1990-01-03 Rbl 0.6072 $1.6469 1991-01-02 Rbl 0.5605 $1.7841 1991-02-13 Rbl 0.5450 $1.8349 1992-01-01 Rbl 0.5549 $1.8021
Replacement currencies in the former Soviet republics
[edit]
Shortly after the fall of the Soviet Union in 1991, local currencies were introduced in the newly independent states. Most of the new economies were weak and hence most of the currencies have undergone significant reforms since their introduction. In the very beginning of the post-Soviet economic transition, it was widely believed by ordinary people and monetary institutions (including the International Monetary Fund) that it was possible to maintain a common currency working for all or at least for some of the former Soviet Union's countries.[citation needed] The wish to preserve the strong trade relations between former Soviet republics was considered the most important goal.[citation needed]
During the first half of 1992, a monetary union with 15 independent states all using the ruble existed. Since it was clear that the situation would not last, each of them used their positions as "free-riders" to issue huge amounts of money in the form of credit (since Russia held the monopoly on printing banknotes and coins). As a result, some countries were issuing coupons in order to "protect" their markets from buyers from other states. [citation needed] This also started to cause massive inflation in the formerly high-valued currency. The Russian central bank responded in July 1992 by setting up restrictions on the flow of credit between Russia and other states. The final collapse of the "ruble zone" began with the exchange of banknotes by the Central Bank of Russia on Russian territory at the end of July 1993. As a result, other countries still in the ruble zone (Kazakhstan, Uzbekistan, Turkmenistan, Moldova, Armenia and Georgia) were "pushed out".[citation needed] By November 1993 all newly independent states had introduced their own currencies, with the exception of war-torn Tajikistan (May 1995) and unrecognized Transnistria (1994). Due to ruinous inflation in the former Soviet Republics, most of the successor currencies had to be redenominated at least once, with the notable exceptions of the Armenian dram, Estonian kroon, Kazakh tenge, and Kyrgyz som.
Details on the introduction of new currencies in the newly independent states are discussed below.
Post-Soviet
country First national currency (with new code)
replacing the "Soviet ruble" (SUR) Conversion rate
from SUR Date introduction for new currency Date leaving
the "ruble zone"[4] Future revaluation or currency replacement
date, new replaced currency
and rate[24] Armenia Armenian dram
(AMD) 200 SUR
= 1 AMD 22 November 1993 November 1993 - Azerbaijan Second Azerbaijani manat
(AZM) 10 SUR
= 1 AZM 15 August 1992 August 1993 1 January 2006:
Third Azerbaijani manat (AZN)
5,000 AZM = 1 AZN Belarus Belarusian ruble
(BYB) 10 SUR
= 1 BYB 25 May 1992 26 July 1993 2000:
Second Belarusian ruble
(BYR)
1,000 BYB = 1 BYR
2016:
Third Belarusian ruble (BYN)
10,000 BYR = 1 BYN Estonia Estonian kroon
(EEK) 10 SUR
= 1 EEK 20 June 1992 22 June 1992 1 January 2011:
Euro (EUR)
15.6466 EEK = 1 EUR Georgia Georgian kuponi
(GEK) 1 SUR
= 1 GEK 8 April 1993 20 August 1993 20 October 1995:
Georgian lari (GEL)
1,000,000 GEK = 1 GEL Kazakhstan Kazakh tenge
(KZT) 500 SUR
= 1 KZT 15 November 1993 November 1993 - Kyrgyzstan Kyrgyz som
(KGS) 200 SUR
= 1 KGS 10 May 1993 15 May 1993 - Latvia Latvian ruble
(LVR) 1 SUR
= 1 LVR 7 May 1992 20 July 1992 5 March 1993:
Latvian lats (LVL)
200 LVR = 1 LVL
1 January 2014:
Euro (EUR)
0.702804 LVL = 1 EUR Lithuania Lithuanian talonas
(LTT) 10 SUR
= 1 LTT 1 May 1992 1 October 1992 26 June 1993:
Lithuanian litas (LTL)
100 LTT = 1 LTL
1 January 2015:
Euro (EUR)
3.4528 LTL = 1 EUR Moldova Moldovan cupon
(MDC) 1 SUR
= 1 MDC 10 June 1992 July 1993 29 November 1993:
Moldovan leu (MDL)
1,000 MDC = 1 MDL Russia First Russian ruble
(RUR) 1 SUR
= 1 RUR 14 July 1992 August 1993 1 January 1998:
Second Russian ruble (RUB)
1,000 RUR = 1 RUB Tajikistan Tajik ruble
(TJR) 100 SUR
= 1 TJR 10 May 1995 January 1994 30 October 2000:
Tajikistani somoni (TJS)
1,000 TJR = 1 TJS Turkmenistan First Turkmenistani manat
(TMM) 500 SUR
= 1 TMM 1 November 1993 November 1993 1 January 2009:
Second Turkmenistani manat (TMT)
5,000 TMM = 1 TMT Ukraine Kupono-karbovanets
(UAK) 1 SUR
= 1 UAK 12 January 1992 November 1992 2 September 1996:
Ukrainian hryvnia (UAH)
100,000 UAK = 1 UAH Uzbekistan Uzbek sum-kupon
(UZC) 1 SUR
= 1 UZC 15 November 1993 15 November 1993 1 July 1994:
Uzbekistani sum (UZS)
1,000 UZC = 1 UZS
See also
[edit]
Hyperinflation in early Soviet Russia
List of commemorative coins of the Soviet Union
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https://www.newsweek.com/russia-china-yuan-ruble-1912458
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en
|
Russian Economy Forced into China Pivot after Sanctions Bombshell
|
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"https://d.newsweek.com/en/full/2443047/cover-august-16-23-2024.jpg?w=400&f=58a090a65411b186a00e386fe33eab38"
] |
[] |
[] |
[
""
] | null |
[
"Brendan Cole"
] |
2024-06-13T12:42:23-04:00
|
Russia's Central Bank has said that the yuan/ruble exchange rate will now set the trajectory for all other currency pairs.
|
en
|
Newsweek
|
https://www.newsweek.com/russia-china-yuan-ruble-1912458
|
Moscow's economic ties with Beijing have tightened even more after Russia's Central Bank announced the yuan-ruble exchange rate will become a benchmark for other currency pairs.
The bank's statement on Thursday followed a turbulent day in which the Moscow Exchange (MOEX) suspended trading in dollars and euros following a new raft of sanctions by the United States aimed at thwarting Russia's war effort in Ukraine.
Referring to when Moscow's full-scale invasion started, the central bank said, "Over the past two years, the role of the U.S. dollar and the euro in the Russian market has been consistently declining," business newspaper Vedemosti reported.
The bank said that was because of a "redirection of trade flows to the East and the change in the currency of settlements to rubles, yuan and other currencies of friendly countries," referring to those nations that have not joined Western sanctions against Russia.
"The exchange rate of the yuan/ruble will set the trajectory for other currency pairs, will become a benchmark for market participants," it said. The central bank also announced a suspension of trading in the Hong Kong dollar because it is pegged to the greenback.
Officially neutral on Vladimir Putin's invasion, China has greatly increased its trade with Russia, in 2023 reaching a record $240 billion while Putin has consistently touted a pivot away from the Western-dominated global financial system.
"The exchange rate of the yuan/ruble will set the trajectory for other currency pairs, will become a benchmark for market participants," the bank's statement added, noting last month that the share of the yuan in trading on the Moscow Exchange was 54 percent, making it the main currency in exchange trading.
Dollar-ruble trading volume on MOEX is around 1 billion rubles ($11 million) a day, euro-ruble trading hovers at around 300 million rubles ($3 million), much less than yuan-ruble daily volumes which regularly top 8 billion rubles ($90 million), CNN reported.
Earlier, the Moscow Exchange had suspended trading in dollars and euros after the U.S. Office of Foreign Assets Control (OFAC) released details of its latest round of sanctions which included targeting Russian banks that act as intermediaries in dollar trading on the Russian foreign exchange market.
It means that banks, companies and investors cannot trade either currency via a central exchange and will instead have to rely on over-the-counter deals conducted directly between two parties.
The new sanctions will take full effect on August 13, although companies and individuals will still be able to buy and sell euros and dollars through lenders. Meanwhile, the central bank said all deposits in foreign currencies would "remain safe."
Newsweek has contacted the Russian Central Bank for further comment.
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https://www.forbes.com/sites/roberthart/2023/08/14/russian-ruble-tumbles-past-100-against-dollar-heres-why-thats-significant/
|
en
|
Russian Ruble Tumbles Past 100 Against Dollar—Here’s Why That’s Significant
|
[
"https://specials-images.forbesimg.com/imageserve/5fcdf0e1a0f1fe24fab83587/400x0.jpg?cropX1=0&cropX2=1080&cropY1=0&cropY2=1080"
] |
[] |
[] |
[
"Russian Ruble Tumbles Past 100 Against Dollar",
"ruble",
"russia",
"ukraine",
"currency",
"us dollar",
"exchange rate"
] | null |
[
"Robert Hart"
] |
2023-08-14T00:00:00
|
It marks the first time the Russian ruble has fallen below the threshold since it recovered from an all time low just after Moscow launched its invasion of Ukraine.
|
en
|
Forbes
|
https://www.forbes.com/sites/roberthart/2023/08/14/russian-ruble-tumbles-past-100-against-dollar-heres-why-thats-significant/
|
Topline
Russia’s ruble slipped past 100 per U.S. dollar on Monday morning, a nearly 17-month low that has sparked internal discord over monetary policy as economic pressures from its ongoing war in Ukraine mount and international sanctions erode Moscow’s income streams.
Key Facts
Contra
Oreshkin’s finger pointing at the central bank is a rare sign of public discord among Moscow’s governing institutions since the invasion of Ukraine began. The central bank, which hiked interest rates at a sharper rate than anticipated in July and stopped purchases of foreign currency for the rest of the year last week to shore up the ruble, offers a different explanation for the ruble’s decline, notably the country’s deteriorating trade with foreign partners. The central bank is expected to raise rates again soon.
News Peg
The ruble has been on something of a rollercoaster since Russia launched its invasion of Ukraine. On the back of immediate reactions to the war, it fell to record lows against the dollar before recovering to the highest levels against the greenback since 2015 and becoming one of the world’s best performing currencies. International trade conditions have been a key driver of the ruble’s value, particularly for Russia’s key energy exports. Russia is a key exporter of oil and gas and Europe, previously its main buyer, has been weaning itself off and imposing sanctions like price caps, dampening prices. These prices are rising now as oil demand soars and Moscow looks to Asia—particularly China and India—to find other buyers.
Further Reading
|
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9245
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0
| 77
|
https://www.flickr.com/photos/jlascar/8674923730
|
en
|
Samples of Soviet Rubles
|
[
"https://live.staticflickr.com/8543/8674923730_b62fba441d.jpg",
"https://live.staticflickr.com/8543/8674923730_b62fba441d.jpg"
] |
[] |
[] |
[
""
] | null |
[
"Flickr",
"Jorge Láscar"
] |
2024-08-20T02:15:37.767000+00:00
|
The Soviet ruble or rouble (Russian: рубль; see below for other languages of the USSR) was the currency of the Soviet Union. One ruble is divided into 100 kopeks, (also transliterated as kopecks or copecks Russian: копе́йка, pl. копе́йки - kopeyka, kopeyki).
In addition to standard banknotes, the Soviet ruble was available in the form of foreign rubles (Russian: инвалютный рубль); also, several forms of virtual rubles were used for inter-enterprise accounting and international settlement in the Comecon zone. Many of the ruble designs were created by Ivan Dubasov.
Etymology
The word "ruble" is derived from the Slavic verb рубить, rubit', i.e., to chop. Historically, "ruble" was a piece of a certain weight chopped off a silver ingot (grivna), hence the name [Wikipedia.org]
|
en
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https://combo.staticflickr.com/pw/favicon.ico
|
Flickr
|
https://www.flickr.com/photos/jlascar/8674923730
|
The Soviet ruble or rouble (Russian: рубль; see below for other languages of the USSR) was the currency of the Soviet Union. One ruble is divided into 100 kopeks, (also transliterated as kopecks or copecks Russian: копе́йка, pl. копе́йки - kopeyka, kopeyki).
In addition to standard banknotes, the Soviet ruble was available in the form of foreign rubles (Russian: инвалютный рубль); also, several forms of virtual rubles were used for inter-enterprise accounting and international settlement in the Comecon zone. Many of the ruble designs were created by Ivan Dubasov.
Etymology
The word "ruble" is derived from the Slavic verb рубить, rubit', i.e., to chop. Historically, "ruble" was a piece of a certain weight chopped off a silver ingot (grivna), hence the name [Wikipedia.org]
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https://www.cnn.com/2024/06/13/investing/us-russia-sanctions-dollar-euro-trading/index.html
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en
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MOEX: New US sanctions against Russia force end of dollar and euro trading on Moscow Exchange
|
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] |
[] |
[] |
[
""
] | null |
[] |
2024-06-13T00:00:00
|
New US sanctions against Russia have caused an immediate suspension of trading in dollars and euros on the country’s leading financial marketplace, the Moscow Exchange.
|
en
|
/media/sites/cnn/apple-touch-icon.png
|
CNN
|
https://www.cnn.com/2024/06/13/investing/us-russia-sanctions-dollar-euro-trading/index.html
|
New US sanctions against Russia have caused an immediate suspension of trading in dollars and euros on the country’s leading financial marketplace, the Moscow Exchange.
The exchange, also known as MOEX, and the Russian central bank rushed out statements Wednesday, a public holiday in Russia, within an hour of Washington announcing a new round of sanctions aimed at cutting the flow of money and goods to sustain Moscow’s war in Ukraine.
“Due to the introduction of restrictive measures by the United States against the Moscow Exchange Group, exchange trading and settlements of deliverable instruments in US dollars and euros are suspended,” the central bank said.
The move means banks, companies and investors will no longer be able to trade either currency via a central exchange, which offers advantages such as better liquidity and oversight.
Instead, they will have to trade over the counter, where deals are conducted directly between two parties. The central bank said it would use data from those trades to set official exchange rates.
Many Russians hold savings in dollars or euros, mindful of periodic crises in recent decades when the ruble has crashed in value. The central bank reassured people these deposits were secure.
“Companies and individuals can continue to buy and sell US dollars and euros through Russian banks. All funds in US dollars and euros in the accounts and deposits of citizens and companies remain safe,” it said.
One person at a large, non-sanctioned Russian commodities exporter told Reuters: “We don’t care, we have yuan. Getting dollars and euros in Russia is practically impossible.”
With Moscow pursuing closer trade and political ties with Beijing, China’s yuan has ousted the dollar to become MOEX’s most traded currency, accounting for 53.6% of all foreign currency traded in May.
Dollar-ruble trading volume on MOEX tends to be around 1 billion rubles ($11 million) a day, while euro-ruble trading hovers at around 300 million rubles ($3 million) daily. For yuan-ruble trading, daily volumes now regularly top 8 billion rubles ($90 million).
Dollar rates jump
On the eve of the national holiday, the ruble closed at 89.10 to the dollar and at 95.62 against the euro. Following the sanctions news, some banks immediately jacked up their dollar rates.
Norvik Bank said Wednesday that it was offering to buy dollars for just 50 rubles but sell for 200 rubles, though it later adjusted the rates to 88.20/97.80. Tsifra Bank was buying dollars at 89 rubles and selling at 120.
The US Treasury said it was “targeting the architecture of Russia’s financial system, which has been reoriented to facilitate investment into its defense industry and acquisition of goods needed to further its aggression against Ukraine.”
Russia’s central bank has been bracing for such sanctions for around two years. In July 2022, the bank said it was modeling various sanctions scenarios with foreign exchange market participants and infrastructure organizations.
“This is bad but expected news,” Russian broker T-Investments said on Telegram.
Forbes Russia had reported in 2022 that the central bank was discussing a mechanism for managing the ruble-dollar exchange rate should exchange trading be halted in the event of sanctions against MOEX and its National Clearing Centre, which was also hit by the new sanctions.
MOEX said share trading and money market trades settled in dollars and euros would also cease. The money market comprises low-risk, short-term debt instruments like government bonds and commercial debt.
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https://mises.org/mises-wire/how-soviets-fixed-inflation-ruined-economy
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How the Soviets "Fixed" Inflation, but Ruined the Economy
|
[
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[] |
[] |
[
""
] | null |
[
"Ryan McMaken"
] |
2022-11-03T01:00:00-05:00
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The Soviet regime relentlessly expanded the money supply. To prevent inflation, the regime then created shortages through price controls and economic
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/themes/custom/mises/favicon.ico
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Mises Institute
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https://mises.org/mises-wire/how-soviets-fixed-inflation-ruined-economy
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Price inflation and the resulting business cycles are monetary phenomena, and without increases in the money supply—i.e., monetary inflation—there is no price inflation. If the world were a very simple place, we would see this relationship clearly displayed: when the money supply increased, we would also see a general increase in prices soon thereafter. The world, however, is not a very simple place and an economy can include countless factors that can mask, delay, and otherwise obscure the connection between monetary inflation and price inflation.
For example, monetary policy makers in the US have long benefited from the disinflationary effects of global trade and increasing worker productivity. This means that, for decades, consumers should have seen prices of most goods and services falling. Instead, relentless monetary inflation over the past three decades has resulted in positive price growth that is seemingly mild, and policy makers can claim victory over inflation. Moreover, new money can enter the economy in a variety of ways, often manifesting as asset-price inflation rather than as noticeably high price increases in food or household goods.
Governments also have many tools at their disposal to delay or hide the effects of monetary inflation, sometimes for many years. Price controls and subsidies, for example, can obscure the true costs of goods and services for the end consumer. These tactics cause shortages, bubbles, and other problems, but these can often be blamed on “greed” or “capitalism.”
One particularly interesting case of how governments can hide price inflation for decades is the Soviet Union. Under the Soviet regime, the money supply—denominated in unbacked fiat money, of course—was continually expanded to increase wages and create the impression of prosperity. This would have led to price inflation quickly, but for the shortage economy and demand-killing government policies endured by the average Soviet citizen. As is so often the case, the regime was able to cover up the effects of inflation for a time, but the policies ultimately proved to be disastrous.
Preventing Inflation through State Control of the Economy
As a regime increases the money supply, demand will generally rise. But rising prices will become acute only if there are actually products and services on which consumers and enterprises can spend their new money. Thus, a regime wishing to avoid price inflation can keep increasing the money supply so long as it also reduces demand by limiting the availability of goods. This prevents improvements in the standard of living, but it can indeed keep down price inflation.
This cannot be easily done in a country where the population expects to live under a relatively free economy. In an unhampered or partially interventionist economy, a lack of widespread price controls often means a large number of goods and services will continue to be supplied, albeit at higher prices, in an inflationary environment. But, because the USSR oversees a heavily controlled, command economy, the regime could more easily dictate prices, limit imports, and force consumers to save rather than spend.
Ultimately, though, by the late 1980s, the regime was forced to “open up” its economy to market forces as a restive population increasingly demanded a standard of living more in line with what existed in the West. However, once the regime ceased controlling prices and savings, prices exploded, government revenues cratered, and the Soviet regime ended its days in an orgy of money printing and hyperinflation.
How the Soviet Regime Manipulated Price Inflation
The fact that the Soviet regime preferred shortages to inflation has its roots in the hyperinflationary history of the Soviet economy. By the middle of the twentieth century, Soviet planners were already well aware of the dangers of hyperinflation. With the end of the czarist regime, and the cessation of the First World War, the new socialist regime took over a country that was already broke and highly dysfunctional. Hyperinflation soon followed. The Bolsheviks attempted to do away with money altogether, but this naturally failed, and a number of monetary reforms followed. By the late 1920s, however, the regime was engaging in widespread price control efforts, including the highly unusual tactic of peacetime rationing. This limited price inflation for many goods and set the stage for the “repressed inflation” that would become a mainstay of the Soviet system for decades. Prices nevertheless began to rise rapidly in many areas, and the Second World War brought on a new wave of price inflation and prices spiraled upward. This was followed by another currency reform—i.e., devaluation—of the Soviet ruble in 1947. Efforts at price controls were redoubled and overall prices actually declined during the 1950s.
Throughout much of the 1950s and early sixties, the regime was perennially concerned about price inflation. In fact, Soviet ideology stipulated that inflation did not actually exist in the USSR. As claimed by Vasily Garbuzov, the Soviet minister of finance in 1960:
In the Soviet Union there is not and cannot be any inflation; the possibility of inflation is fully precluded by the very system of planned socialist economy. In our country both wholesale and retail prices are established by the government and, therefore, the purchasing power of the ruble is controlled on a planned basis…. The stability of Soviet currency is guaranteed by the monopoly of currency and the monopoly of foreign trade which is one of the most important advantages of the socialist economic system.
This is propaganda, of course, but in a sense, Garbuzov was right. A socialist state really could moderate the price effects of monetary inflation by throttling back the standard of living and consumption options whenever it seemed prices were rising.
This was necessary because the money supply continually expanded as wages rose. In their 1985 study on the Soviet economy, Igor Birman and Roger Clarke wrote:
The reason for the excess supply of money is that the state has consistently “over-paid” the population in the form of wages, pensions, stipends etc., which exceed production (plus net imports and minus net exports) of consumer goods at the currently ruling retail prices (fixed by the state). While there has indeed been a steady rise in retail prices (despite the stability of the official index) this has been very far from sufficient to equalise the real effective demand of the population with the available supply of goods. In other words, the state generates excessive purchasing power in the hands of the population.
In an unhampered economy wages are closely tied to the productivity of workers, so wages would not grow out of proportion to the amount of goods and services available in the economy. In a socialist, economy, however, the price of labor—i.e., wages—were arbitrarily set like all other prices. Wages under socialism are also paid out of the public treasury and can be increased to the liking of the regime itself. This often meant rising wages because higher wages were politically popular. Rising wages potentially created the impression of prosperity, even when the economy wasn’t actually more productive. Also, as Birman and Clarke note
During the last two decades [i.e., 1965 to 1985] it has pursued the “confidence trick” policy of trying to stimulate productivity by higher money wages without raising the supply of consumer goods by nearly sufficient to translate the increase in money wages into increased real incomes.
Increasingly, after 1965, the Soviet money supply was out of proportion to the productive capability of the economy. In a relatively free economy, this would quickly lead to price inflation, but the Soviet regime had ways of shifting the economic burden elsewhere.
Thus, prices were kept under control not through fiscal disciple, but through price controls. This led to shortages because, if wages were rising while goods prices could not, demand quickly exceeded supply. Soviet citizens often found they had very little to spend their money on, with the result being the long queues and empty store shelves we now associate with the Soviet economy.
By this mechanism, the regime can continue to inject new money into the economy but also prevent ordinary people from spending “too much” money and thus ratcheting up consumer prices. The downside, of course, is that the standard of living goes down considerably, as historian Steven Efremov notes:
The system of price controls had deleterious effects both for Soviet consumers and for the economy as a whole…. Shortages of most foods led to lower quality diets, and many consumer products that were routinely available in the West, such as telephones, cars, and modern washing machines were amazingly rare in the Soviet Union. Living conditions were less comfortable in many ways, with less housing space per person, no central heating, no air conditioning, and often no sewer connections or hot water.
The result was essentially forced savings. Efremov continues:
When consumers could not find anything they wanted to buy, many chose to save a portion of their income every year. This effect was cumulative over the years, as unsatisfied demand from each year was carried over to the next and the population’s savings continued to grow.
In some respects, this was good for the regime because these unspendable savings could also be tapped for buying the government’s debt. But this stored up money—known as the “monetary overhang” increased much more rapidly than did the production of goods and services, and Efremov concludes “the money supply had grown to become many times larger than what was needed for regular circulation.” This would come back to haunt the regime when the economy began to open up and consumers could finally spend the money, causing prices to soar.
An additional method of pushing down official inflation numbers was to subsidize consumer goods. Retail price subsidies were introduced in the Soviet Union in 1965 as part of a major economic reform package. Soviet authorities then began to implement price subsidies of “basic foods such as meat, milk, bread, sausages, sugar, and butter.” The purpose was to keep prices stable. These subsidies survived subsequent economic reform efforts and became a larger and larger part of the economy heading into the 1980s, with government spending rapidly increasing to push down prices through subsidies.
Spending Rises and the Economy Stagnates
None of this worked to actually help the Soviet standard of living.
To combat the effects of monetary expansion and falling standards of living, the Soviet regime perennially attempted to increase production to narrow the gap between money growth and productivity growth. Due to the impossibility of economic calculation under socialism, however, Soviet central planning could not coordinate goods and capital efficiently, and the productivity of workers stagnated.
Another result was further declines in government revenue. Although taxes were levied and some revenue could be collected on imports, government monopolies—i.e., government-owned enterprises—controlling a variety of goods and services produced much of the income the regime relied on. These enterprises could theoretically increase revenues with increased output, but output often stagnated as wages—i.e., production costs—rose.
Government budgets thus increased alongside falling revenue. Byung-Yeon Kim notes, for example, that “retail price subsidies … rose from 4 per cent of state budget expenditure in 1965 to 20 per cent in the late 1980s.”
Yet the availability of consumer goods certainly did not keep up. Rather, consumer had few places to spend their money and “the share of forced savings in total monetary savings increased from 9 per cent in 1965 to 42 per cent in 1989.”
Measured by the prevalence of shortages, it is clear the Soviet economy was in a state of stagnation by the late 70s. Shortages became even worse. Kim concludes:
Consumer market conditions in the official retail network deteriorated rapidly in the years 1965–78. This is most likely to have been caused by stable consumer prices faced with rising consumer purchasing power. Even though the rapid deterioration halted during the period 1979–83, this was not sufficient to restore equilibrium. Further worsening of consumer market conditions occurred after 1984. In particular, shortages in the consumer market intensified significantly in 1989 because household money income increased much faster than the availability of consumer goods.
The wage increases continued with little positive effect. Throughout the 1980s, Soviet state-owned enterprises raised wages in an attempt to create a “wealth effect” and to placate dissatisfied workers. Yet, with few goods available to buy, rising wages ceased to be much of an inducement to harder work. Birman and Clarke note that after a time, rising wages “become ineffective—additional unspendable money is no longer an incentive to work harder or more productively.” Worker productivity suffered. This problem only accelerated as the decade wore on and, as Igor Filatochev and Roy Bradshaw note, “wages increas[ed] four times faster than labour productivity throughout 1989 and 1990.”
The 1980s: A Time of Growing Deficits and Money Printing
All of this spending on wages and subsidies combined to create conditions under which government deficits rose, leading for even greater monetary expansion. Kim concludes:
Although the budget deficit was officially recorded only from 1985 onwards, many reliable Soviet and western sources have maintained that a sizable deficit already existed well before the 1980s.
Up until the 1970s, there had been a connection between revenues and spending to the point that deficits were manageable. As time went on, borrowing to address deficits became increasingly expensive for the regime, and printing money—above and beyond the need for wages—was increasingly viewed as a way out:
Printing of money began well before the late 1980s, that is, from 1977 onwards, and tended to increase during the late 1970s and early 1980s. Overall, the Soviet budget tended to destabilize the consumer market, at least after 1977, by putting money into circulation. In particular, a sharp increase in printing money in the late 1980s suggests that the Soviet economy was then on the verge of collapse.
Amount of Deficit Financed by Printing Money
Image
Source: Byung-Yeon Kim, “Causes of Repressed Inflation in the Soviet Consumer Market, 1965–1989: Retail Price Subsidies, the Siphoning Effect, and the Budget Deficit,” Economic History Review 55, no. 1 (February 2002): 121.
Hyperinflation Sets In
By the late 1980s, the Soviet economy was already primed for price inflation, yet so-called repressed inflation continued to be a sizable factor pushing down official inflation rates until the mid-1980s. With the advent of perestroika and some limited promarket reforms, Soviet citizens were increasingly able to purchase more goods and import more goods. Decades of forced saving led to runaway inflation as shortages became less acute in many cases. That “monetary overhang” came out of savings accounts and drove price inflation to disastrous heights.
It took some time for the official numbers to catch up with reality. The regime’s official numbers had long understated even the moderate levels of price inflation in earlier periods, but after the mid-1980s, the gap between official inflation and estimated real inflation grew considerably. Efremov summarizes the divergence, noting that in 1988 official inflation was 0.6 percent but 6 percent in the real marketplace. By 1989, official inflation was 2 percent, but it was really 8 percent. In 1990, it was 5.3 percent, but really 20 percent. And then the wheels started to really come off in 1991, with 96.3 “official” inflation that was really 200 percent.
The Soviet Union collapsed shortly thereafter, and the new regime did not issue falsified inflation numbers anymore. Instead, the real inflation rate in 1992 was estimated to be more than 2,300 percent. Hyperinflation continued for three more years until the old Soviet ruble finally ceased to exist.
A Socialist Guide to Lowering Price Inflation
The Soviet experience provides an example of how expanding the money supply forces a choice. In response, an inflationist regime can commit to reining in monetary inflation to tackle rising prices. Or a regime can “solve” an inflation problem by destroying demand via price controls and shortages. The latter choice requires lowering the standard of living and gradually reducing consumer choices again and again. Yet even this draconian option fails to prevent hyperinflation in the end.
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Following the collapse of the USSR, a new Russian bartering system was born : Planet Money : NPR
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[
""
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[
"Dave Blanchard",
"Kenny Malone"
] |
2022-04-01T00:00:00
|
For a brief, strange period after the U.S.S.R. collapsed, "real" money was less valuable than tradeable objects like bricks or towels. We look back at the Russian barter economy and we see the nature of money and value underneath all currency. | Subscribe to our weekly newsletter here.
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en
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NPR
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https://www.npr.org/2022/04/01/1090312774/when-bricks-were-rubles
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When the USSR collapsed, the ruble tanked and items like bricks became a more desirable form of payment. The post-Soviet economy became a laboratory for curious experiments in money. A barter economy briefly emerged. Then a gas-backed currency. All this in less than 10 years.
Today, what this strange, short period in Russia's history can teach us about all currencies, and about what makes an economy and its money valuable.
Music: "New Pulse" "A Dream of Bronze" and "Tailwind."
Find us: Twitter / Facebook / Instagram / TikTok
Subscribe to our show on Apple Podcasts, Spotify; and NPR One.
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https://history.stackexchange.com/questions/60772/why-did-the-ussr-have-two-sources-of-currency
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en
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Why did the USSR have two sources of currency?
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2020-08-17T23:20:38
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An inscription on the 1, 3, and 5 rubles notes says that it is a State Treasury Note (Государственный Казначейский Билет), and that it is guaranteed by the entire property of the Union of SSR (
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en
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https://cdn.sstatic.net/Sites/history/Img/favicon.ico?v=c55b54740769
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History Stack Exchange
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https://history.stackexchange.com/questions/60772/why-did-the-ussr-have-two-sources-of-currency
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In 1922, the Soviet economy was suffering from high inflation and the government introduced a new gold-backed currency called Chervonets which was equivalent of the old Russian imperial gold coin of 10 roubles. Initially, chervonets was exchanged for 11,400 roubles. As the roubles and chervonets were both in circulation, every day, the State Bank published exchange rate between roubles and chervonets.
The same year, the State Bank started issuing banknotes denominated in chervonets which had inscription that 1 chervonets is equivalent of 7,74234 grams of gold. Chervonets was freely convertible and was traded on foreign exchanges.
By the end of 1923, chervonets mostly replaced old Soviet roubles and comprised 80% of the money supply. In 1924, the Soviet government started also issuing State Treasury Notes in denominates of 1,3 and 5 gold roubles (1 chervonets equals 10 gold roubles) but they weren't gold-backed. In 1925, the rouble was pegged to the chervonets with the same rate of 1 chervonets to 10 roubles.
With the end of New Economic Policy, increasing money supply, introduction of price controls, chervonets started losing its convertibility and in 1930 stopped being traded on foreign exchanges. In 1937, new banknotes for 1,3,5,10 chervonets had new inscription which didn't mention its gold equivalent but still stated that they are "guaranteed by gold, precious metals, and by other assets of the State Bank". In 1947, the State Bank issued new banknotes in denominations of 10,25,50 and 100 roubles. The dominations of 1,3 and 5 roubles were still issued as Treasury notes. The last Soviet banknotes were issued in 1961 with the same distinction between "State Bank Note" for denominations of 10,25,50 and 100 roubles and "State Treasury Note" for denominations of 1,3 and 5 roubles but with no real distinction in practice.
Your State Treasury Note is similar to the German Rentenmark, which was based on mortgaged public property up to a sum of 3.2 Billion Goldmarks.
The State Bank Note was similar to the German Reichsmark, which was, theoretically, pegged to gold/US dollar.
In theory an inflation of the Reichsmark would not effect the value of the Rentenmark, since the value of the property (in Reichsmark) would automatically rise with the inflation.
The theory also assumes that the population trusts the issuing authority not to print more banknotes than the value of the mortgaged property.
The reason to retain both was the hope that the population would remain confident in the value of the State Treasury Note (Rentenmark), even if the value of the State Bank Note (Reichsmark) radically lost value.
The Soviet Rubel, togeather with the currencies of all the other Socialist countries at that time, were non-convertable currencies. They were only intended for internal usage.
In the Soviet Union, the idea was to make socialist distribution of income look more equal than it actually was. The mechanism was to create rubles of different value and pay different classes of people in different kinds of rubles.
Rubles that were tied to "hard currency" such as dollars or gold, held their value better than "Soviet" rubles that were tied to the economy of the Soviet Union. As noted in a book called "Klass", at times, the value of a "certificate" (hard currency) ruble might approximate one dollar, while it cost twenty "Soviet" rubles to buy one dollar on the black market. So the "official" exchange rate (of hard rubles) might be 1 to 1, while the "real" rate (of Soviet rubles) would be 20 to 1.
A laborer might earn 500 rubles a month while a senior party member earned 1000 rubles a month. On paper, that's a two to one ratio in favor of the party member, in line with "socialist" principles.
Except that the laborer was paid in "Soviet" rubles in worth 5 cents on the dollar, or $25 a month, while the party member was paid in "dollar" rubles worth 100 cents on the dollar, or $1000 a month. Then the party member would, in fact, earn 40 times as much as the laborer, a ratio more in line with capitalist principles.
The USSR had a continuous complex capitalist market throughout its history. (War communism was RSFSR.). This market mediated relations between various enterprises. In particular the finance and capital banks mobilised state and firm investments.
The obvious rationale behind high value notes being firm guaranteed and low value notes being state guaranteed is to allow mediating institutions (banks) to be able to fail liquidating outstanding credit notes values. In contrast low value notes are state guaranteed. This ensures that in a bank run crisis within the Soviet Union the state places a greater risk on workers and speculators and petits bourgeois and the few private bourgeois. In contrast in an inflationary crisis the state is insulated from issuing new notes as its notes rapidly become worthless.
Yes, large scale investment was centrally planned as were major markets, but these and the consumer market were mediated by market relations.
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Commanding Heights : Russia Money
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Since 1897, the ruble has been on the international gold standard, and stable. Russia's industrialization requires substantial foreign investment. Ruthless tax levies and high tariffs on imports of industrial products aim to protect Russia's infant industries and help balance the budget. Foreign investment soars, and by 1913 an estimated one-third of all capital in Russia is foreign owned.
Russia's state debt has increased so dramatically prior to WWI, the country has become the greatest international debtor in the world. During the war, taxes are hard to collect, and the government is forced to print more paper money and float its loans domestically and abroad. The cornerstone of Russian financial policy, the gold standard, is abandoned, and the ruble is undermined by inflation.
With the October 1917 revolution, the Marxist concept of the moneyless economy becomes a desired goal, but not yet a practical one. The Bolsheviks nationalize the banks, but make no attempt to restrict inflation. With the destruction of the market economy, inflation soars, and money becomes virtually valueless. A black market based on barter develops to fill the vacuum.
In order to make the market elements of the New Economic Policy (NEP) work, a stable currency is needed. The State Bank reopens and is empowered to issue a new ruble, the chervonets, backed by gold reserves and a balanced state budget. A money market and stock exchange revive alongside the new money.
The banking system is owned and managed by the government. Gosbank is the USSR's Central Bank and its only commercial bank. The ruble is an almost entirely internal currency unit, with the government fixing its rate of exchange with foreign currencies somewhat arbitrarily. Without a market economy, prices are set by the State Committee on Prices, and the real value of the ruble is difficult to determine.
A currency reform that makes 10 old rubles equivalent to one new ruble in 1947 attempts to replace the inflated money of the war years with a firmer currency. As was its intention, it deals a severe blow to the flourishing black market, but also sharply reduces the value of people's savings not kept in a bank.
Following the oil crisis, from 1973 to 1985 energy exports account for 80 percent of the USSR's expanding hard-currency earnings. By the late '70s up to 40 percent of hard currency in foreign trade is being spent on increasing agricultural imports to maintain the informal social contract with the people: low pay in return for cheap food.
World oil prices plummet by 69 percent, and the dollar, the currency of the oil trade, drops like a stone. Almost overnight, the windfall oil and dollar profits the USSR has enjoyed for more than a decade are wiped out.
Gorbachev's reforms force state enterprises to rely to a greater extent on their own financial resources rather than on the central budget. Several new banks are set up to finance industrial undertakings, ending the monopoly of Gosbank. By 1989 inflation begins to make a major impact as goods grow ever more scarce. In 1987 checking accounts begin for personal savings accounts.
The budget deficit exceeds 20 percent of estimated GDP. Soviet foreign debt balloons to $56.5bn at a time when the ruble is undergoing steep devaluation. Capital continues to flee the USSR, and Soviet gold reserves and foreign currency accounts disappear never to be found.
The Soviet state bank is replaced by 15 republic central banks. The ruble is retained in the belief that a single-ruble zone will promote economic reintegration. By 1993 many CIS states create their own currencies. Russia ends Soviet price controls, but monetary stabilization proves elusive. To prevent enterprises going bankrupt, the state prints money. In 1992 inflation reaches 2,323 percent.
Despite having sold off much of its industry, the Russian government finds itself virtually bankrupt. High rates of taxation serve only to drive businesses into systematic tax evasion. To cover its persistent deficits, the Treasury issues bonds (GKOs) at very high rates of interest. They help keep the government temporarily afloat and allow it to persuade the IMF it is solvent and deserves loans.
The aftershock of the Asian economic crisis hits Russia. With commodity prices tumbling, Russia, a major commodity export earner, sees its revenues plummet. Unable to fund its soaring GKO obligations despite a large IMF loan, the government defaults on its debts. Overnight most of Moscow's large banks go bust. The ruble declines to less than a third of its previous exchange rate.
Helped by rising commodity prices and the 1998 ruble devaluation, Russia's foreign exchange reserves rise, and the ruble strengthens. A major reform that cuts tax from a progressive rate up to 30 percent to a flat rate of 13 percent aims to simplify and boost tax collection and stimulate consumer spending. Russians begin to buy and use euros alongside dollars as a safe foreign currency.
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https://www.elibrary.imf.org/view/journals/024/1950/002/article-A002-en.xml
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en
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The Soviet Price System and the Ruble Exchange Rate
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1950-01-01T00:00:00
|
SINCE MARCH 1, 1950, there has been much discussion of the significance of the revaluation of the ruble exchange rate and the simultaneous adjustment of retail prices in the U.S.S.R. which occurred on that date. An answer to the questions which have arisen requires an analysis of the price system in the U.S.S.R. and of the meaning of the ruble exchange rate in U.S.S.R. international economic relations. This study attempts to analyze these issues and, in particular, their relation to the question of the assumption of international functions by the ruble.
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https://www.elibrary.imf.org/view/journals/024/1950/002/article-A002-en.xml
|
Price System in the U.S.S.R.
Price formation
The economy of the U.S.S.R is a money economy. Prices are expressed in rubles, and payments by producers and consumers are made in money, although there are exceptions to this rule. As in capitalist countries, some services are provided free of charge; in the U.S.S.R., however, these services represent a larger share of consumers’ real income than in any capitalist country.
Except on “kolkhoz markets,”1 price formation is not automatic. There are price lists for all goods and for services which are not given free of charge, and transactions concluded at other than the fixed official prices are illegal.
The technique of cost calculation in individual enterprises may be similar in the U.S.S.R. to that used in capitalist countries, but the economic mechanism behind the calculation is different. There are no prices for the factors of production which may be summarized under the general term “nature,” and prices for capital are largely absent. Inequalities in average costs of production caused by differences in natural conditions, or in the skill of management, are not allowed to become a source of quasi-rent. An industrial enterprise in the U.S.S.R. consists generally of several plants, whose managers perform only technological functions. The management of the enterprise credits each plant for its output at its planned average costs (based mostly on actual past performance) plus a certain mark-up for profits, which at the most amounts to 10 per cent. The enterprise delivers the output of its plants to a central selling organization for the region at prices which result from averaging the costs and profits of the individual plants. The central selling organization, in turn, sells at prices equal to the average of costs plus profit mark-up for all enterprises in the region. Variations in these quasi-arbitrary uniform selling prices, which may be described as “delivery prices,” are usually allowed only between regions.
Demand and supply of any producers’ good in short supply are not adjusted by increasing its price above average production costs plus a mark-up for profits, but through an arbitrary reduction by the planning authorities of the quantities requested by individual enterprises (in their original “microscopic” plans). Occasionally, the central economic authorities increase the profit mark-up for individual enterprises or groups of enterprises to enable them to undertake rationalizing investments or to extend their productive capacity if they are considered to be working under specially favorable conditions and to have a skilled management. However, this is not done with the aim of adjusting effective demand to existing supply conditions.
This method of pricing is similar to that used by capitalist countries in wartime.2 It carefully avoids the marginal approach; indeed, the marginal principle is regarded in the U.S.S.R. as heretical, and Soviet economists are careful not to propose anything which appears to be influenced by it. Nevertheless, even in the Soviet economy there is some evidence of the application of the marginal principle. Each manager of a Soviet enterprise in making technological decisions is likely to act in a way that implies adherence to the marginal principle, just like an entrepreneur in a capitalist country. The factors of production of which the supply is determined for the Soviet “entrepreneur” are, however, much more numerous than for his counterpart in a capitalist country. Nor can he regulate the output of his plant in the same way as a capitalist entrepreneur. As a result of the generally narrower scope for the application of the marginal principle than in developed capitalist countries, the allocation of productive resources may be presumed to be objectively less economic in the U.S.S.R. than in such capitalist countries.
The prices of producers’ goods also include turnover taxes. But the tax rates for producers’ goods are very low, and the rates on producers’ goods which are used in the production of other producers’ goods are lower than on those which are next to the stage of consumers’ goods. The rates for a single commodity are also believed to be different, according as the commodity is to be used in the production of producers’ or consumers’ goods.
Turnover, or rather sales, tax rates on consumers’ goods, on the other hand, are very high,3 sometimes constituting as much as 90 per cent of the selling price. Even on goods which in British terminology would be called “utility goods,” they are frequently as high as 75 per cent. In 1940, the turnover tax constituted about 61 per cent of the total value of consumers’ goods sold to the public; for 1941, a percentage of 73 was planned.4
Turnover taxes are used to influence consumer demand so that it exerts little influence on the structure of production of producers’ goods. If the scales of preference of those who control economic planning differ from consumers’ preferences, the turnover tax may be used to adjust the demand for any good to an arbitrarily regulated supply. Even for goods in which the planners take no interest, but permit production in proportions regulated by consumers’ choices, producers’ interpretation of consumers’ wishes may be obscured by tax rate manipulations. Since, moreover, consumers are unable by their individual actions to determine either the rate or the volume of savings, “consumers’ sovereignty” is for the most part absent in the Soviet economy.
This method of pricing, largely independent of the marginal principle, gives the Soviet Government power to introduce, almost overnight, changes in the level of prices or in the price structure. Such over-all changes in price lists have occurred several times in Soviet history. In some instances, price adjustments had become necessary as a result of conditions created by inflation or other forms of economic mismanagement; in others, they seem to have been the inevitable outcome of the normal working of the Soviet economic organization.
Prices and economic development
The Soviet economy may be said to be in equilibrium at a given national income level and a given price level of consumers’ goods if the prices of all elements in the cost calculation have been established so as to assure equality between the value of the current production of consumers’ goods and total consumers’ outlays, which in the U.S.S.R. are almost identical with total wage earnings minus loans to the state and insignificant voluntary private savings. If—with given preference scales of consumers and of those who ultimately decide about economic planning,5 given techniques of production, and given conditions of economic and social structure—production and government expenditure expand at the same rate as population, the prices of the elements in the cost calculation and of consumers’ goods may remain unchanged. As soon, however, as either the technique of production, the economic and social structure, preference scales, or per capita production of consumers’ goods changes, cost elements and/or prices of consumers’ goods must also change.
In fact, in the U.S.S.R. national income, techniques of production, and economic structure change rather rapidly. Since the Soviet Government also aims at distributing increments in the national income so that per capita production of consumers’ goods may increase, frequent adjustments in wage earnings and other cost elements and/or in prices of consumers’ goods are therefore to be expected.
If the supply of consumers’ goods increases, equality between supply of and demand for these goods—one of the conditions of general equilibrium—may be maintained by means of a piece-work system of pay, efficiency premiums, and increases in basic wage rates. If total earnings increase in a certain period more or less than the supply of consumers’ goods, the prices of these goods should be changed. Before the war, the Soviet economy was subjected to continuous (although receding) inflationary pressures caused by imperfections in economic management, and there were frequent upward adjustments in the prices of consumers’ goods. Since the war, however, as a result of reconstruction, large imports of machinery, increasing supplies of raw materials, and improvements in the skill and organization of labor, the per capita supply of consumers’ goods has increased rapidly. At the same time, actual average costs of production have been continuously and significantly decreasing, and the cost elements, adapted to the previously existing conditions, have become more and more fictitious. In a highly centralized planning system there is, naturally, strong resistance to frequent changes in the cost elements and in the prices of consumers’ goods. It is a great convenience in planning to operate with stable “values.” In contrast to the actual tempo of economic development, the Soviet system of economic management may therefore in this respect be regarded as rigid.
Under dynamic conditions, planning which operates on values fixed in the past gradually becomes ineffective, and after a certain time, during which only sporadic and uncoordinated adjustments are made beneath the unchanged surface of fixed prices, over-all changes become necessary. Planned costs must be revised so as to reinstate economic incentives in enterprises, and wages and/or prices of consumers’ goods must be changed so as to restore equilibrium between the production of consumers’ goods and the demand for them, in conformity with whatever policy determines the share of consumption in the national income.
Since the monetary and price reform of December 1947, there have been three such major adjustments, each involving an over-all reduction in prices. The method of adjustment by increasing wages and salaries has not been used because it seemed less convenient for planning purposes. Changes in wages would seriously distort all the established elements of cost calculation.
Technique of price reduction
A description of the techniques used in the price reduction of March 1950 and of its financial implications cannot be found in the Soviet publications which are available. They may be deduced, however, from the principles of the Soviet price and financial system.
A reduction in the prices of consumers’ goods in the U.S.S.R. can be accomplished either by decreasing production costs, by lowering the turnover tax, or by a combination of the two, and either with or without a reduction in earnings.
Actual costs of production decrease gradually. As long as planned delivery prices remain unchanged, a reduction in costs results only in increased extra profits, i.e., profits above the established mark-up. An adjustment of planned costs to the actual level of costs is permitted only when the planning authorities so decide. Then if turnover taxes remain unchanged, the retail prices of consumers’ goods must be reduced in accordance with the reduction in costs of production.
The reduction of prices in the U.S.S.R. on March 1, 1950 involved an estimated average fall of 15 to 20 per cent. Under the assumption that, on the average, the turnover tax accounts for 60 per cent of retail prices, such a reduction in prices would require a reduction in total costs of production (including a mark-up for profit) by 37.5 to 50 per cent, if the yield of the turnover tax were to remain unchanged. The actual reduction in production costs is unlikely to have been of this magnitude, since there had been a reduction in prices of consumers’ goods and in costs as recently as March 1, 1949. Neither can it be assumed that the price reduction was effected solely by reducing turnover tax rates at unchanged costs of production. With unchanged costs, prices—of which 60 per cent was accounted for by turnover tax—could have been reduced by this means by 15 to 20 per cent only if it were possible to reduce turnover tax rates by 25 to 33 per cent. Such a reduction would have been either too burdensome for the state budget, or would have had to be associated with some new revenue-increasing measures, which would mean a major change in the financial system of the U.S.S.R., about which nothing has been heard. A change of this kind might be deduced if costs of production were to fall while “delivery prices” remain unchanged, the price reductions then being effected by cuts in the turnover tax rates. This would mean the legalization of extra profits in the form of increased profit mark-ups. The Soviet economic authorities, however, aim at the maintenance of rather low profit margins, to prevent managers of enterprises from relaxing their efforts to economize on expenses. (Actual costs in excess of delivery prices may cause an investigation into the work of the manager, followed by sanctions.) Since part of profits may also be used for investment in the enterprises where the profits originate, increases in profits would mean an expansion of decentralized investments with the eventual possibility of far-reaching changes in the planning system.
Actually, it seems probable that in the changes of March 1950 both techniques for reducing prices were used. Planned delivery prices were reduced and turnover tax rates cut. The application of these techniques means either an actual decrease in government revenue or an increase at a declining rate. According to the Soviet official statement, the recent cut in prices will reduce the 1950 expenditures of the population by 110 billion rubles; 80 billion will be saved through lower prices in state stores and 30 billion through price reductions on kolkhoz markets6 and in cooperative stores. This statement probably means that, if prices had remained unchanged (i.e., equal to those of 1949), the population of the U.S.S.R. would have spent in 1950 from their money incomes, increased according to plan, 110 billion rubles more than at the reduced price level. The 80 billion rubles “lost” by state stores would represent 18 per cent of the total revenue planned in the 1949 budget. Even on the assumption that the increase in the national income (at 1949 prices) for 1950 were 20 per cent, and that—if prices had remained at the 1949 level—the percentage increase for state revenue were the same as for the national income, the reduction in anticipated revenue that would be necessary if the price reduction had been only at the expense of current government proceeds would be so large as to be very unlikely. Any increase in the national income is usually divided between consumption and investment (the latter is financed mostly by the state budget) in such a way as to ensure a significant increase in investment, greater than the increase in consumption. The increase in the national income of 1950 would have to be very large if government revenues and, consequently, also investment were to increase significantly, in spite of a cut in the rate of increase in government revenues so severe that, if it had been applied in 1949, actual revenues would have fallen by almost one fifth.
This seems to suggest that the reduction in prices may have been made possible in part by a revision in workers’ efficiency rates, basic wage rates probably remaining unchanged. Sporadic revisions of this kind are possible in view of changes in methods of production (e.g., increases in capital equipment) which increase the efficiency of labor.
However, insofar as the reduction in retail prices was achieved through a cut in turnover tax, it was probably carried out at the expense not only of current budgetary revenues, but also of the revenues of the previous year (1949). Inventories were probably gradually accumulated before prices were reduced (which implies a relative reduction in government revenues during the period of accumulation and also a volume of production in excess of current sales to the public). The expansion in consumers’ demand in response to reduced prices may be satisfied by a gradual depletion of inventories until current production increases sufficiently. In view of these considerations, it seems possible that the reduction of prices may have been achieved without any significant reduction in the earnings of the population.
The relative importance, in practice, of these techniques for reducing prices cannot be evaluated. However, it may be assumed that the combined effect of increased national income and reduced prices will be an increase both in real per capita consumption (although probably not to the full extent of the price reduction) and in government revenue and investment.
The reduction of prices of consumers’ goods by various percentages (necessarily arbitrarily selected, although an analysis of the market certainly preceded this action) will cause shifts in demand. Further price adjustments, covering a wide range of goods, are therefore to be expected. The reduced prices, however, may have been set at such a level that the aggregate value of consumers’ goods available (after previously accumulated extra inventories have been sold) will for some time be smaller than the amount of money which consumers would be willing to spend on consumption goods during the same period. This would have effects similar to those of an inflation. In such a case, the necessity of adjusting prices to consumers’ preference scales (while the general price level remained unchanged) would be less strongly felt, since under inflationary conditions almost any combination of goods can be sold easily, even though relative prices are not correctly fixed.7
Price spread
As pointed out above, costs of production under the Soviet pricing system do not include rent or interest, and in industries producing capital goods they include only small profits (compared with those which would be considered as normal in capitalist countries). What is not included by state enterprises in the costs of production is collected by the state in the form of high turnover taxes on consumers’ goods. Turnover taxes are also a means by which the quantity of consumers’ goods which is demanded is made equal to the quantity supplied. The volume of output of consumers’ goods is set by the central planning authorities, and may be safely assumed to be smaller than would be produced if a fair degree of consumers’ sovereignty existed in the Soviet Union. Turnover taxes are therefore a means of collecting a significant part of state corporate savings, which correspond to investments decided by the planning authorities.
The result of this pricing system is a larger discrepancy than is usual in capitalist countries between the delivery prices of all goods—which roughly correspond to wholesale prices charged by producers in capitalist countries—and the retail prices of consumers’ goods. For example, for bread this discrepancy amounted before the war to about 75 per cent of the retail price, which is probably more than the difference between the producers’ price and the retail price in any capitalist country. In comparison with the situation in capitalist countries, there are, therefore, in the U.S.S.R. one group of goods which are relatively “cheap” and another which are relatively “expensive.” To the relatively “cheap” category belong all producers’ goods and consumers’ goods at delivery prices, while to the relatively “expensive” group belong all consumers’ goods at the retail stage of distribution. The difference between the price levels of these two groups of goods may be called the relative price spread or, more briefly, the price spread.
The relative price spread in the U.S.S.R., in comparison with, say, the United States, indicates the extent to which the difference in the Soviet Union between the wholesale (delivery price in the U.S.S.R. and wholesale factory price in the U. S.) and retail prices of representative baskets of goods and services is greater than in the United States. If prices of baskets of “cheap” goods in the United States and the U.S.S.R. are denominated “Aa” and “Ar,” respectively, and prices of “expensive” goods “Ba” and “Br,” the following formula may be used for measuring the relative price spread in percentage terms:
100 - ( Ar Br : Aa Ba ) 100
It is, however, always possible to assume a hypothetical exchange rate for the Soviet currency which will make Aa equal to Ar. The formula for the relative price spread then becomes
100 ( Br - Ba ) Br
A comparison of the price situations in capitalist countries may also reveal the existence of relative price spreads there. Differences in taxation, in social insurance systems, and in customs duties, may create price spreads for various groups of goods and services, and restrictions on the mobility of factors of production and monopolies help to maintain these spreads.8 These spreads, together with the effects of differences in natural resources, may make one country “cheap” or “expensive,” depending on the groups of goods used for comparison, and thus affect the commodity composition of exports and imports. However, such price spreads as exist between capitalist countries are not nearly so extensive as in the U.S.S.R.
The formula suggested above cannot in practice be used to calculate the actual price spread in the U.S.S.R.—e.g., in comparison with the United States—since information on prices in the U.S.S.R. for the “A” group of goods is lacking, and on prices of the “B” group of goods is very limited. The price spread may, however, be estimated indirectly. The turnover tax content in the retail prices of consumers’ goods is known to have been 61 per cent in 1940 and to have been planned at 63 per cent for 1949. It may be assumed to amount to 60 per cent at present. The remaining 40 per cent represents delivery prices plus costs of distribution. If costs of distribution in the U.S.S.R. represent the same percentage of delivery or wholesale factory prices as in the United States, the price spread in the U.S.S.R. relative to the United States would correspond to the turnover tax content in the aggregate value of consumers’ goods. In fact, although the bureaucratic distribution apparatus of the U.S.S.R. works clumsily, the distribution costs in the Soviet Union may be relatively lower than in the United States, because profits of trading organizations are set very low. There are, moreover, in the United States, some price-increasing taxes which correspond to part of the 60 per cent turnover tax content in the Soviet prices of consumers’ goods. The relative price spread may therefore be assumed to be somewhat less than 60 per cent.
Under the conditions of a market economy, an estimate such as that made above would be fairly representative of the price spread for all goods of category “A.” But in the U.S.S.R. the price mechanism does not fulfill its traditional function; the allocation of factors of production between the industries producing capital goods and those producing consumers’ goods is not motivated by relative profitableness. It is, therefore, possible for the price spread for capital goods to differ significantly from that for consumers’ goods, and there seems to be convincing evidence that this is actually the case. Profits in industries producing capital goods are set at a much lower level than profits in industries producing consumers’ goods, the labor assigned to the former group of industries is generally better trained, and the machinery used there is more extensive and modern. Consequently, the price spread between capital goods and raw materials at the “delivery” stage and consumers’ goods at the retail stage may be larger than that between consumers’ goods at the “delivery” and the retail stages.
Meaning of the Exchange Rate of the Ruble
Exchange rate and the price spread
In order to interpret the real meaning of the ruble exchange rate in its relation to the Soviet price system, let the assumption first be made that the Soviet authorities make decisions concerning international transactions on the basis of existing domestic and foreign prices, as is done in free competitive economies.
In free competitive economies, the difference between wholesale and retail prices does not vary very much from country to country; in other words, any relative price spread that may exist cannot be of great significance. If an exchange rate is allowed to have its full effect upon foreign trade transactions (i.e., without direct or indirect premiums or surcharges), this in itself tends to limit the size of any price spreads. And, in turn, if price spreads are small, this facilitates the use of single exchange rates in economic relations with other countries. The relative price spread for the U.S.S.R., however, is large, and this has a direct bearing on the foreign value of the Soviet currency.
Soviet merchandise exports and imports are composed of goods of “A” price category. Even consumers’ goods are sold to export organizations at delivery prices. Therefore, if prices are to be used as a guide in the decisions of the Soviet foreign trade organizations, the exchange rate used in foreign trade transactions would have to conform to the “A” price level. A similar assumption applied to consumers’ goods and services sold to foreigners inside the U.S.S.R. would mean that the exchange rate applied to foreign travellers, businessmen, and diplomats should conform to the “B” price level. Because of the price spread discussed in the preceding section, these two exchange rates cannot be identical. As long as the present system of pricing is maintained in the U.S.S.R., and on the assumption that exchange rates should conform to domestic and foreign prices, there should therefore be two exchange rates for the ruble.
The realization that no single exchange rate can fully indicate the relationship between the values of the Soviet and other currencies is of great significance for many comparisons between Soviet and capitalist economic magnitudes. Economists sometimes use prices of consumers’ goods for estimating the proper exchange rates of various countries. Because there are no significant relative price spreads among those capitalist countries which do not have extensive economic controls, the exchange rate thus estimated may approximately represent the price relations of all goods in such countries. Such an exchange rate, however, would not be proper for an estimate of, for example, the dollar value of the budgetary investment appropriations in the Soviet Union. Estimates and analyses of the national income of the U.S.S.R. may also lead to erroneous conclusions if the peculiarity of the Soviet economic system discussed above is not taken into account.
On the assumption that the decisions of Soviet authorities concerning international transactions are based on existing domestic and foreign prices, and that there are generally favorable conditions for the development both of exports and of tourism, the existence of a single ruble exchange rate would result in smaller foreign exchange proceeds than if there were two exchange rates (or three, if the relative price spread between prices of capital goods and delivery prices of consumers’ goods is significant).
In fact, after July 1, 1950 there was to be only one exchange rate for the Soviet currency, 4 rubles to 1 U. S. dollar. Until June 30,1950, there were two exchange rates: one official, 4 rubles per U. S. dollar, which followed from a declared gold content of the ruble, and the other preferential, 6 rubles per U. S. dollar, which was called the “diplomatic” exchange rate. The existence of two exchange rates, however, did not necessarily mean that there was conformity between exchange rates and prices in the U.S.S.R. and abroad; nor did it prove that decisions concerning individual international transactions were based on prices in the U.S.S.R. and abroad. Even an approximate conformity between exchange rates and price levels in the U.S.S.R. and abroad could merely suggest, but not prove, that exchange rates were actually applied to Soviet individual international transactions. There was, in fact, no such conformity; and there is no conformity between the present single exchange rate of the ruble and the price levels of either “A” or “B” groups of goods. This will be shown in the last section of this paper. In the present section, only the problem of the conformity between exchange rates and prices in individual transactions will be discussed.
The relevance of the exchange rate
Foreign trade in the U.S.S.R. is a state monopoly. Its purpose, apart from the achievement of the highest possible prices for exports and the lowest possible prices for imports,9 is, as has been explicitly stated by those responsible for Soviet economic policy, to shield the domestic economy from external influences.
Foreign trade organizations buy in the domestic market goods destined (by the economic plan) for export, and sell imported commodities to Soviet enterprises at domestic delivery prices. (The prices of imported goods may be set more arbitrarily by import organizations, since in many cases they are very imperfect substitutes for goods produced domestically.) Export goods are sold and import goods bought by the trade organization at the prices prevailing in foreign markets. Prices in trade with other member countries of the Council of Mutual Economic Assistance10 deviate from world market prices because of adjustments for differences in transportation costs, etc. They are probably also influenced by the comparative bargaining powers of the parties to a trade agreement.
The ruble exchange rate is of no interest to Soviet domestic producers (i.e., those who sell goods destined for export to exporting organizations), to final purchasers of imported goods, or to foreign exporters and importers. Transactions between foreign exporters and importers and Soviet specialized foreign trade organizations are settled in foreign currencies (or in some abstract unit of value), and transactions between Soviet foreign trade organizations and Soviet suppliers or purchasers of exported or imported goods in rubles. No explicit exchange rate is used.
In view of the method of price formation in the U.S.S.R. and of the fact that domestic prices are “shielded” from outside influences, any resemblance between the price patterns in the U.S.S.R. and in other countries could be nothing more than a sheer coincidence. Therefore, if a uniform exchange rate were applied to foreign trade transactions, carried out according to a plan constructed independently of domestic prices, some exporting and importing enterprises would make extra profits while others would suffer losses. The exchange rates actually involved are, therefore, only implicit and necessarily multiple, and, in the management of the Soviet economy, are of no significance. The exchange rate is, in fact, irrelevant in foreign trade transactions. It in no way serves as a guide in making foreign trade decisions. If it were to be used for this purpose, it would have to be a price, which the ruble exchange rate is not.
The only use of the official exchange rate in the U.S.S.R. is to convert foreign exchange reserves into rubles in order to make them an item formally comparable with other items in the balance sheet of the State Bank. But since the official exchange rate does not represent an average value of the ruble (as will be shown in the next section), the ruble values of foreign exchange obtained in this way cannot serve any planning purpose. It is doubtful whether even an exchange rate which conformed to the “A” price level could serve a planning purpose, because the distortion of prices would mean that any shift in the commodity composition of exports or imports would cause changes in the value of the ruble.
A comparison of foreign trade balances expressed in terms of a foreign currency and in rubles may provide a limited substitute for the guidance functions of the exchange rate. U.S.S.R. foreign trade may be balanced in terms of rubles and at the same time unbalanced in terms of foreign exchange, or vice versa. A comparison of these balances might reveal fiscal ruble losses or profits. Where accounts are unbalanced in terms both of foreign exchange and of rubles, a formula may be devised for calculating the fiscal results of foreign trade transactions.
If there are to be neither gains nor losses, the following condition must be fulfilled: IrId=ErEd; where “Ir,” “Er” are the ruble values of imports and exports, and “Id” and “Ed” the dollar values of imports and exports, respectively. This condition means that the average implicit exchange rate for imports is equal to that for exports. If it is not fulfilled, the difference between the actual ruble value of imports and the hypothetical dollar value which would give a zero fiscal profit, Ir-IdErEd, or a similar difference computed for exports, IrEdId-Er, shows the range in terms of rubles of the fiscal profits or losses. If exports and imports in terms of dollars are equal, both formulae reduce to Ir—Er.
Such calculations may be applied for the purpose of choosing the goods to be exported or imported. In order to eliminate or diminish fiscal losses, or to obtain fiscal profits, the commodity composition of exports and imports should be set so as to maximize the implicit exchange rate of the ruble. In fact, however, shifts in the commodity composition of Soviet foreign trade are determined by the requirements of Soviet economic plans for production and consumption, and appear not to be influenced by any consideration of this kind.
While the official exchange rate of the ruble is irrelevant in foreign trade transactions, it is relevant in transactions with foreigners who purchase consumers’ goods and services inside the U.S.S.R. at retail prices and pay in rubles. The scope of transactions in which the exchange rate is relevant might be widened or narrowed. For example, it might be made relevant in payments for transit charges, if these had to be made in rubles according to domestic tariffs, or its relevance might be limited by organizing special stores for diplomats, where payments were required in foreign exchange. It is, however, difficult to imagine any practical policy which would completely eliminate the relevancy of the exchange rate.
Since the official ruble exchange rate is irrelevant for foreign trade purposes, i.e., in transactions in goods of “A” price category, but is relevant in transactions in goods of “B” price category, it should be expected to conform to the “B” price level.
Significance of the Revaluation of the Ruble
Revaluation of the ruble
On February 28, the Council of Ministers of the U.S.S.R. announced the revaluation of the Soviet ruble and, as indicated above, a reduction of retail prices of important consumers’ goods, effective March 1, 1950. The value of the ruble used in accounts for foreign trade transactions was fixed at 0.222168 grams of fine gold, which corresponds to a price for fine gold of 4.5011 rubles per gram. The exchange rate of the ruble was accordingly changed from 5.30 to 4 rubles to the U.S. dollar, a revaluation of 32.5 per cent.11 The preferential diplomatic exchange rate was changed from 8 to 6 rubles to the U.S. dollar, a revaluation of one third. As of July 1, 1950, the preferential diplomatic rate was abolished.
By tying the ruble to gold, the Soviet Government discontinued the practice established in 1937 of calculating exchange rates in terms of other currencies on a dollar basis: “In the event of further changes in the gold content of foreign currencies or in their exchange rates, the State Bank of the U.S.S.R. shall alter the foreign exchange rate of the ruble correspondingly.”12
The revaluation of the ruble was justified, according to the official statement, by three reductions of prices of consumers’ goods in the U.S.S.R. since the monetary reform of 1947, and by the increase of prices in Western countries.13 This “resulted in … strengthening of the ruble, increasing its purchasing power, so that it is now 14 higher than its official exchange rate.”15
“Internationalization” of the ruble
Since under the present price and foreign trade system of the U.S.S.R. the exchange rate of the ruble has been irrelevant for foreign trade transaction purposes, the opinion of the Soviet Government that the rate should conform to relative price levels, and its decision to change the rate, may suggest that the Soviet Government intends to give the ruble some new important functions in its foreign trade.
The Soviet Union has ceased, since 1949, to observe strictly the long-established rule of expressing foreign trade agreements in terms of foreign exchange, mostly in U.S. dollars. The values of goods to be exchanged were expressed in rubles in a few of the agreements concluded in 1949 with Eastern European countries. Also, after the ruble revaluation of February 28, 1950, Poland published her 1949 foreign trade statistics in terms of the new ruble, instead of in U.S. dollars, as had previously been customary. This development may seem to indicate that the U.S.S.R. intends, in its trade transactions, to replace the U.S. dollar with the ruble, and to create a ruble bloc in Eastern Europe, possibly with a multilateral system of settlement.
If the ruble were to replace the U.S. dollar in Eastern European trade, it would have to fulfill the same functions that are now performed by the dollar. (This would be a necessary but not a sufficient condition for the ruble to become an international currency.) At present the U.S. dollar is used by member countries of the Council of Mutual Economic Assistance in quoting prices and values in international trade and for reserve purposes. In fulfilling the first function, however, it expresses approximately world market prices, and not the prices actually prevailing in the U.S.S.R. and in other Eastern European countries. The importance of the dollar as an element in monetary reserves is very limited: trade under bilateral agreements is usually balanced, and temporary export surpluses represent an accumulation of “clearing dollars,” which can be converted into goods only within specified commodity lists at negotiated prices. The dollar performs a reserve function in the full sense only for the final export surpluses which, according to some agreements, must be paid in U.S. dollars. But even in this case, this function is performed only because dollars are convertible into goods in countries outside Eastern Europe and are therefore acceptable by any Eastern European country.
For the ruble to fulfill the functions at present performed by the U.S. dollar, it must be made acceptable in payments for final trade surpluses, and indeed if trade within the Eastern European countries is to be multilateralized, it must be made acceptable for that purpose to a larger extent than is the U.S. dollar at present in that area. This requirement might be satisfied in two ways.
First, the prices used for foreign trade purposes might still be world market prices, while Eastern European countries would be supplied with the amounts of rubles convertible into U.S. dollars (or any other Western currency) needed to cover their import surpluses in trade with the West, which for all practical purposes would be equivalent to the convertibility of rubles into gold. This solution, although it probably would contribute to the multilateralization of trade, would not in fact replace the U.S. dollar with the Soviet currency. The ruble supplied to Eastern European countries by the U.S.S.R. would not be the ruble circulating in the Soviet Union. As long as the valuation of goods exchanged was based on world market prices, it would in fact be only the U.S. dollar or some other currency, to which the name of ruble would be given while it was being used in Eastern Europe. Such a solution may be called a nominal substitution of the ruble for the U.S. dollar.
Alternatively—and this is the only way by which the Soviet currency could actually be made a substitute for the U.S. dollar in its economic functions—the ruble might be made directly convertible (within the conditions of the trade agreements) into goods at the delivery prices prevailing in the U.S.S.R. and in other member countries of the Council of Mutual Economic Assistance. This would mean that the ruble exchange rate would become relevant in foreign trade transactions, and would perform the function of guidance normal to an exchange rate. If this condition were fulfilled, the ruble would cease to be a purely domestic currency and, under favorable technical conditions, might come to be used in international transactions, not only inside the U.S.S.R. but also by other countries.
The new exchange rate and the price level
The March 1950 revaluation of the Soviet currency could be regarded as a preliminary step toward internationalization of the ruble, only if the exchange rate of 4 rubles to the U.S. dollar then established were to correspond approximately to the “A” price level in the U.S.S.R. Such an exchange rate would facilitate the changes in price patterns which are necessary if the exchange rate of the ruble is to perform guidance functions and become a relevant factor in international trade.
The lack of data on wholesale prices in the U.S.S.R. does not permit any precise estimate of the ruble exchange rate which would conform to the “A” price level in the U.S.S.R. and to general price levels in Western countries. On the basis of limited data on the prices of consumers’ goods, the exchange rate which corresponds to the purchasing power of the ruble, measured in terms of prices of “B” goods, may, however, be roughly estimated at about 25 rubles to the U.S. dollar. The value of the ruble measured by reference to the cost of living is greater because of the importance in the U.S.S.R. of relatively inexpensive services, e.g., rents, and may be estimated at about 20 rubles to the U.S. dollar. If the relative price spread in the U.S.S.R. amounts to 60 per cent, the average exchange rate based on “A” prices, calculated on the basis of the simplified formula, would be around 10 rubles to the U.S. dollar, with the rate appropriate for capital goods perhaps somewhat higher. On this hypothesis, the ruble seems, at the present exchange rate of 4 to the dollar, to be overvalued by about 150 per cent. If the price spread in the U.S.S.R. is assumed to have been estimated with sufficient accuracy, the present exchange rate is thus too high to represent even approximately the relation between average domestic Soviet prices of “A” goods and wholesale prices in Western countries.
It might be argued that the present ruble exchange rate has been established because it corresponds to the prices and exchange rates of the members of the Council of Mutual Economic Assistance, which account for about two thirds of the total “commercial” foreign trade16 of the U.S.S.R. If this were so, the currencies of the Eastern European countries, in relation to Western currencies, would also be overvalued by about as much as the ruble.
The exchange rates of at least three countries, Czechoslovakia, Hungary, and Poland, which account for the greater part of Eastern European trade with the U.S.S.R., probably correspond approximately to their “B” price levels, and in any case are not overvalued by 150 per cent. To ascertain how far the present ruble exchange rate corresponds to Eastern European prices and exchange rates, however, rates corresponding to “A” price levels should be compared. Since such exchange rates do not exist in these countries, the Soviet Government cannot have been motivated in its decision to revalue the ruble by a desire to adjust it to Eastern European exchange rates.
It may be concluded that, at the present exchange rate, the ruble is seriously overvalued in comparison with any currency of importance to the U.S.S.R., and that it does not represent even approximately the “A” price level purchasing power parity.
Conditions for relevance of the exchange rate
Even if the present ruble exchange rate corresponded approximately to the relation between “A” price levels in the U.S.S.R. and in Eastern European countries and wholesale price levels in Western countries, this would not be a sufficient condition for the internationalization of the ruble. A further condition would also have to be fulfilled: national exchange rates would have to be made relevant in international trade transactions. Only then, under favorable technical circumstances and arrangements, might the ruble become an international currency. This condition has not so far been fulfilled in the U.S.S.R. or in the Eastern European countries which are members of the Council of Mutual Economic Assistance.
If internationalization of the ruble is to be achieved on a world scale, Soviet domestic prices in foreign trade transactions would have to be adjusted to Western price patterns, in order to make them relevant for foreign trade transactions. Western price patterns could be influenced only insignificantly by the U.S.S.R., through changes in the volume or the commodity composition of its trade. The changes which would be necessary in Soviet domestic price patterns, and possibly also in its taxation system17 would, however, be far-reaching. That this would be the aim of the Soviet Government is improbable. It would involve radical changes in economic planning, and for that matter in the whole economic system of the U.S.S.R., and is in any event impossible on ideological grounds. The Soviet economic system and its technical methods of economic management are considered by the Soviet authorities to be superior to any other, and the conviction that the acceptance of external influences would impair the purity of socialist principles, as interpreted by the Communist Party, is deeply rooted in Soviet minds.
It might be argued, however, that internationalization of the ruble may be feasible if limited to the U.S.S.R. and other members of the Council of Mutual Economic Assistance (possibly including Eastern Germany and China). This, it might be maintained, is possible, since Eastern European prices could be adjusted to Soviet patterns by governmental administrative action. An Eastern European clearing union could then be created and a certain degree of multilateralization achieved.
Such a unification, however, would require the members of the Eastern European Clearing Union to have two different standards of value for foreign trade: one for partners in the Union and the other for the outside world. The first would be based on Union price patterns, the latter on the U.S. dollar and other Western currencies. It is doubtful whether such a system would represent any simplification, compared with the present one.
In any event, such unification would not be consistent with the present economic doctrine and management of the U.S.S.R. The system of pricing (as distinct from the price pattern which results from the pricing system) applied in the U.S.S.R. is regarded there as the ultimate perfection of economic calculus and is gradually being accepted by other Eastern European countries. Because of differences in basic economic facts, the price patterns which will emerge in Eastern European countries after the Soviet pricing methods have been introduced could, however, be similar to those in the U.S.S.R. only by accident. There are significant differences in the patterns of prices of labor. Therefore, if goods moving in intra-Eastern European trade were to be priced according to the Soviet price pattern, this could not be done by a thoroughgoing application of the Soviet pricing methods in other Eastern European countries. Either the Soviet price pattern or the Soviet pricing methods may be accepted by Eastern European countries. Both cannot be maintained at the same time. The fact that the Eastern European members of the Council of Mutual Economic Assistance are introducing the Soviet pricing methods seems to rule out the possibility, at least for the time being, of a unification of prices.
Therefore, of all the characteristics of an international currency, only the purely technical condition that the ruble shall be related to national currencies through exchange rates can be and is fulfilled. This in itself, without fulfillment of the condition that exchange rates shall be relevant, gives the ruble only the appearance of an international standard of value, and may satisfy only the requirements of prestige. Prices in trade agreements may be expressed in rubles, but these prices will either be agreed arbitrarily or will represent only translations from the prices of Western capitalist countries.
Since it can hardly be expected that the Soviet pricing methods will be changed in the foreseeable future, any spectacular moves of the U.S.S.R. affecting foreign trade and exchange, similar to the latest revaluation of the ruble, would at most mean only an approach to the nominal substitution of the ruble for the U.S. dollar. There is no doubt that the Soviet Union is gradually consolidating the economies of Eastern European members of the Council of Mutual Economic Assistance, and that foreign trade is one of the main instruments of this policy. But it seems evident that this will involve only a consolidation of planning, the pooling of commodities and specialization of production, and that currency considerations will play no active part in it.
Diplomatic exchange rate
Since under the present price patterns in the U.S.S.R. the exchange rate of the ruble must continue to be irrelevant, an improvement in the terms of trade of the U.S.S.R. in relation to Eastern European countries could not have been the aim of the revaluation of the ruble. The terms of trade were, however, improved in relation to all countries by the revaluation of the diplomatic exchange rate. The Soviet Government does not intend to increase its foreign exchange proceeds from tourists, diplomats, etc., and, therefore, could afford to revalue the diplomatic ruble, although it was already greatly overvalued. It is possible, however, that the demand for rubles at the diplomatic exchange rate is already so inelastic that this revaluation will in fact slightly increase total foreign exchange proceeds. At the same time, the revaluation of the ruble may decrease the expenditures of Soviet representatives in Eastern European countries and in Eastern Germany, and reduce the costs of all services bought by them in these countries, which are not covered by clearing trade agreements.
June 1950
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Russian rubles to US dollars Exchange Rate. Convert RUB/USD
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Convert RUB to USD with the Wise Currency Converter. Analyze historical currency charts or live Russian ruble / US dollar rates and get free rate alerts directly to your email.
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1 RUB to USD stats
The performance of RUB to USD in the last 30 days saw a 30 day high of 0.0118 and a 30 day low of 0.0110. This means the 30 day average was 0.0115. The change for RUB to USD was -2.04.
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https://www.russiaeguide.com/russian-travel-information
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Russian Currency – Russia E
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2021-12-11T20:47:10+03:00
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General info Russian Currency General info Population Cuisine Currency The base Russian currency is the Ruble (Rus: Рубль [Rubl], symbol: ₽), and it is printed on bills in six denominations of 10, 50, 100, 500, 1000, and 5000.One ruble is divided into 100 kopecks (Rus: копейка [kopeyka]).Today, circulating coins exist in denominations of 10 kopecks, 50
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Travel Russia Guide -
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https://www.russiaeguide.com/russian-travel-information
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Currency exchange booths are numerous and easy to locate at most street corners. Just look for the sign “ОБМЕН ВАЛЮТ” (obmyen valyut). Airports and large hotels usually offer their own exchange facilities.
Most major currencies are normally convertible at larger banks in big cities. Outside major cities, money changers buy only U.S. Dollars or Euros. Good quality bills are more likely to be accepted than damaged or torn ones. You may be asked for your passport to change money.
State-controlled Sberbank and VTB Bank are the most reliable banks in Russia. They have the most widespread branch and ATM networks.
For more information on Russian banks, visit the websites of the major banks:
Credit cards are widely accepted in large shops, restaurants (including fast-food outlets), bars and nightclubs. But museums and train stations as well as smaller shops and street kiosks most commonly take cash. Keep cash at hand when travelling to the smaller towns and villages.
Visa and Mastercard are welcome almost everywhere in Russia, while American Express and Diner’s Club can rarely be used.
ATM machines are widely available and can be found in airports, in the lobbies of mosthotels, in shopping centers/malls, in metro stations and next to banks. Remember, ATM’s may not be available in small villages and rural area.
There is no limit to the amount of Russian rubles, foreign currency, travelers cheques allowed to be brought into/from Russia.
Imported/exported Russian rubles, foreign currency, travelers cheques are not subject to customs declaring, and can be moved through the “Green” Channel (Green Corridor) if their total amount does not exceed the equivalent of U.S. $10,000.
Imported/exported monetary instruments, except for travelers checks, are subject to customs declaring, regardless of the amount.
Tipping in bars and restaurants is normally 10%. Tipping taxi drivers and petrol attendants is not a common practice, however, If you would like to give a tip, the recommended percentage is about 10%.
Bargaining is not a Russian habit but it is worth asking about special deals and any discounts that may apply.
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dbpedia
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https://www.latimes.com/archives/la-xpm-1989-01-08-fi-148-story.html
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en
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Convertibility of the Ruble Will Test the ‘New’ Soviet Union
|
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[
""
] | null |
[
"MICHAEL PARKS"
] |
1989-01-08T00:00:00
|
The Soviet Union is moving through a politically charged debate toward making its ruble an international currency that will be convertible on the world market, hoping that this will boost trade substantially without greatly disrupting the domestic economy.
|
en
|
/apple-touch-icon.png
|
Los Angeles Times
|
https://www.latimes.com/archives/la-xpm-1989-01-08-fi-148-story.html
|
The Soviet Union is moving through a politically charged debate toward making its ruble an international currency that will be convertible on the world market, hoping that this will boost trade substantially without greatly disrupting the domestic economy.
As part of a broad trade reform that goes into effect in April, the Soviet Union’s Bank of Foreign Economic Affairs will run foreign currency auctions for Soviet companies that earn money abroad or need it to purchase foreign equipment or materials.
This will replace a 60-year-old system in which Soviet organizations receive foreign currency allocations from the state, and it will probably mean a limited but sharp devaluation from the official exchange rate of $1.65 to the ruble.
How far the ruble will fall is uncertain--it is worth only 20 cents or 25 cents on the black market--and concern is growing over the impact on prices and domestic supplies that a broad devaluation could have.
Vladimir M. Kamentsev, chairman of the state Foreign Economic Affairs Commission and a deputy premier, recently denied Western speculation that the ruble’s initial devaluation would be 50%, saying this was a misinterpretation of a government decision adjusting export prices.
But Kamentsev, addressing a news conference, refused to say what the government thinks is a reasonable exchange rate or what it expects will emerge from the thrice-yearly auctions.
The state will maintain considerable control of the ruble’s value through the Bank of Foreign Economic Affairs in the initial stages. But the Council of Ministers, which is the Soviet Cabinet, announced plans last month to free the rate gradually by eliminating present government-set exchange rates, a complex system of 10,000 “differentiated currency coefficients” now used in foreign trade.
Shortcut to Market
The council also said it plans to allow Soviet prices to respond within limits to supply and demand on the international market in the next two years.
This followed an earlier decision by the Communist Party’s ruling Politburo to make “stage-by-stage convertibility” a key element of the country’s long-term economic strategy--a decision that implied greater trade with the West in the future as well as a basic shift in the party’s economic philosophy.
However, many reform economists are pushing for a series of bold strategic decisions by the Soviet leadership to cut through the knot of issues--ranging from price reform, consumer subsidies and deficit spending to government decentralization and industrial reorganization--that has set limits on economic reforms.
For some of these reformers, ruble convertibility is a shortcut toward introducing market forces into what remains a government-planned, government-managed economy.
“We are looking for a breakthrough and making our ruble convertible could be it,” one Soviet think-tank economist said last month. “As an issue it is not at the center, as price reform is, but it would force decisions on other questions that are more contentious because they are political and ideological.
“And there is no denying that we need to boost our exports badly. Ruble convertibility not only makes trade easier and offers incentives to our enterprises, but it implies a devaluation that puts all our trade on a sounder basis.”
A currency is described as “convertible” when it can be readily exchanged for other currencies by being bought and sold on the international money markets.
But there are degrees of convertibility, and Soviet authorities are examining an initial stage in which the ruble would probably be exchanged in a controlled, limited market between banks, other financial houses, foreign investors and Soviet enterprises.
New Earnings Policy
Although most socialist countries keep track of the trade among themselves in “transferable rubles,” the Soviet ruble has not been freely convertible for decades.
The main reason has undoubtedly been Moscow’s fear of losing all its gold reserves, its small hoard of U.S. dollars, West German marks and other “hard” currencies and probably all of its export earnings as it sought to redeem rubles and maintain the currency’s value.
A second reason, however, was the Soviet leadership’s early determination to protect the new socialist economy from the ups and downs of world capitalism by isolating it. As a result, Soviet foreign trade, $215 billion in 1987, contributed only 2% to the country’s net material product.
Under the new governmental policy, announced last month, Soviet enterprises will be allowed to keep more of their foreign earnings and to use them in new ways in an effort to increase export production.
All Soviet enterprises, including the newly formed cooperatives, will now be allowed to compete on international markets, if they can, although the government will retain a veto right if they begin to undercut one another or if “their activities harm the interests of the state.”
In another measure to increase export earnings and attract foreign investment, the government decided to permit foreigners to hold a majority of shares in joint ventures; previously, they have been limited to 49%, and only about 150 joint ventures have been formed.
Making its currency convertible is now recognized here as one of the basic economic challenges Moscow faces if it is to increase its foreign trade with products that are competitive on the world market and, in this way, to underwrite its industrial modernization and expansion.
Western executives are eager for ruble convertibility to make dealing with the Soviet Union easier and more profitable for them. The ruble’s present inconvertibility limits Western sales to Moscow to a fraction of their potential and means that the basis for any major deal, including joint ventures, must be a product that can be sold or traded abroad to pay the foreign partner.
But underlying the trade problem, economists here point out, is the Soviet Union’s need to manufacture products that are in demand worldwide, products that would in turn create a demand for the ruble and make it worth holding. The country, in fact, is seen as facing central choices on this and related issues that will reshape the whole Soviet economy.
First Steps Critical
In an article entitled “Either Strength--or the Ruble,” Nikolai Shmelev, a leading reform economist, argues in the January issue of the influential political journal Znamya that the Soviet Union has stubbornly tried to maintain the false value that dictator Josef Stalin set for the ruble in 1950 and has consequently weakened its economy.
For too long, the country had dodged the hard reality that the ruble had little value because the Soviet economy was so weak and produced so little of value on the world market aside from raw materials, Shmelev contends. While full, immediate convertibility is impossible, first steps are important in reforming not only trade but the whole economy, he says.
Shmelev makes the creation of wholesale markets in the Soviet Union itself a priority; at present, most goods are allocated by the Soviet central planning agencies, and that means that even with rubles, a buyer cannot obtain goods because the state allocation order is more important than money.
The second condition, he contends, is the much delayed reform of Soviet domestic prices, which are set at present by a state agency on the basis of formulas and calculations that seem unrelated to either production costs, domestic supply and demand or the world market.
With these basic reforms, Shmelev says, the ruble could become convertible for wholesale transactions in the next few years, but it would be fully convertible, in the way that the U.S. dollar or the British pound sterling or the Japanese yen are, only in a decade.
‘Building Socialism’
“Full convertibility of the ruble is impossible without realistic retail prices--that is, without a far-reaching price reform,” Shmelev asserts with unusual caution. “And we ought to tread warily here, for too much is at stake. Economic reform is not yet going strong, and any unwise action can put it seriously at risk.”
Other reform economists, however, see ruble convertibility as a good way to cut through many of the complex strategic questions facing the Soviet leadership, effectively forcing the pace of the restructuring of the country’s economy.
Making the ruble convertible, they assert along with many Western analysts, will test Moscow’s willingness to reduce the role of central planning and to increase that played by market forces, to replace the system of state administration with entrepreneurial freedom for industrial managers and to depart from its previous practice of economic autarky, which had become an integral element of the concept of “building socialism” and protecting it from capitalism.
“We need a real economic mechanism to connect the conditions of our economic life with those of the world market,” Svetlana Kuznetsov, an economist at the International Institute of Economic Problems of the World Socialist System, said recently. Citing the boost this would give to foreign trade, she proposed creation of a new monetary unit, dubbed by some as “the convertible ruble” and by others as “the gold ruble,” as the first step toward making the ruble convertible.
Although she acknowledged the scope of the problems involved, Kuznetsov said: “Let’s not allow ourselves to be hindered by all sorts of fears of ‘cataclysms.’
“The main thing,” she added, “is to understand that the question of the convertibility of the ruble has already been posed by the needs of perestroika ,” or restructuring, President Mikhail S. Gorbachev’s broad program of reforms. “If we keep the ruble as it is, we will not only fail to cope with certain problems, we will exacerbate them.”
As the issue has moved into the forefront of economic problems confronting the government, Soviet leaders have begun to take differing positions that reflect their approaches to overall reforms, according to economists here. And the result has been even greater contention, not only among academic economists but also within the government and party hierarchy.
“We are in a very difficult bind on the ruble--we must make it convertible to boost trade and to achieve fundamental economic reforms, but the cost of doing so could be very, very high,” a senior Soviet economist who is working on the question said recently.
“So, there is a need for caution. Too great a devaluation would mean higher domestic prices, possibly greater domestic shortages resulting in more restrictions on trade rather than fewer and other negative changes.
“And yet caution makes us move more slowly, more tentatively, putting off a lot of questions that really need urgent solution.”
While most orthodox economists and conservative government bureaucrats urge a cautious, step-by-step approach and warn that the benefits are too dubious and the procedure too difficult, liberal reformers are divided, with some, like Shmelev, urging more basic reforms first, while others see the possibility of a breakthrough and want to push all the harder.
Faster Moves Wanted
“The loss of time is saddening, as the currency reform is being postponed by two and a half years,” Boris Fyodorov, an economist at the Institute of World Economics and International Relations, a prestigious Soviet think-tank, wrote in a front-page commentary in the government newspaper Izvestia last month.
Fyodorov, a leading advocate of the Soviet Union’s broader integration into the world market as a stimulus for greater productivity at home, wants faster, bolder moves, fearing that the step-by-step approach will result in half measures that will inevitably fail.
Price reform, perhaps the key to the country’s long-term economic rehabilitation, has already been stalled by the Soviet leadership’s fear that any sharp increases in prices will undermine support for perestroika .
And Leonid Abalkin, director of the Soviet Academy of Sciences’ Institute of Economics, is warning that perestroika as a whole is passing through a particularly dangerous period when major decisions must be made. For Abalkin, the need is not so much speed--he accepts with regret the delay in price reform--but resoluteness.
“We had hopes that (it) would be simple and easy to solve all our problems and to achieve quick results,” he said at a recent briefing for reporters here. “Public opinion expected a miracle, in fact, and people do love miracles. People are now sobering up and paying more attention to the depth of the (economic) problems, whether it be overall growth or price reform or the ruble’s convertibility.”
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https://corporatefinanceinstitute.com/resources/foreign-exchange/russian-ruble-rub/
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en
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Russian Ruble (RUB)
|
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2023-10-13T13:46:20+00:00
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The Russian Ruble refers to Russia’s currency. Coming into use in the 14th century, the ruble is the second oldest currency after the Sterling
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en
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//cdn.corporatefinanceinstitute.com/assets/cfi-favicon-3-150x150.png
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Corporate Finance Institute
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https://corporatefinanceinstitute.com/resources/foreign-exchange/russian-ruble-rub/
|
What is the Russian Ruble (RUB)?
The Russian Ruble refers to Russia’s currency. Coming into use in the 14th century, the ruble is the second oldest currency after the Sterling Pound. In 1704, it became the first European currency to be decimalized, when the ruble was equivalent to 100 kopeks.
Russian ruble notes are printed in Moscow’s state-owned factory, which began its operations at the end of World War I. Coins are minted in both Moscow and the almost 300-year-old St. Petersburg Mint. While there is no official symbol, py6 (three Cyrillic characters equal to RUB in Russian) is currently used to represent the Russian ruble.
History of the Russian Ruble
The history of the ruble dates back to 1704, when the coin was standardized to 28 grams of silver during the rule of Peter the Great. A new standard was implemented on December 17, 1885, which did not affect the silver ruble but lowered the gold content to 1161 grams. Later, during the rule of Nicholas I, the silver ruble was declared a monetary unit and a principal instrument of payment, and banknotes became a payment support instrument.
Although the ruble went through innovations, reforms, and trials, the value remained intact until 1971. The design of the Russian currency changed in 1991 during the Soviet Union’s dissolution. The Central Bank of the Soviet Union placed into circulation new notes and coins. The Bank of Russia also issued Russian ruble banknotes in denominations 5,000 and 10,000. There was a new reform in 1993, which along with the new notes issued, aimed to bring an end to the circulation of Soviet versions.
Current Russian Ruble
A new 10-ruble coin made of brass-plated steel, incorporating optical security features, was issued in October 2009. The 10-ruble banknote would’ve been discontinued in 2012, but a lack of 10-ruble coins forced the central bank to pause this and bring new coins into circulation. Bimetallic commemorative coins of 10 rubles will continue to be issued.
A collection of circulated Olympic memorial coins of 25 rubles made of cupronickel began in 2011. Many small special edition coin denominations remain in circulation, representing national historic occasions and anniversaries.
In 2017, the Central Bank of Russia launched two new banknotes – 200 RUB and 2,000 RUB. A vote was held in September 2016 to determine the icons and cities to be shown on the new notes. Russian Internet users selected the symbols through an online poll conducted by the Bank of Russia. The Russian Central Bank unveiled the new icons in February 2017.
Russian Ruble and International Trade
On November 23, 2010, Russian President Vladimir Putin and the then-Prime Minister of China, Wen Jiabao, declared that Russia and China would use their currencies instead of USD for bilateral trade. The goal was to further strengthen relations between Moscow and Beijing and secure their local economies during the economic crisis.
In January 2014, Putin stated that the forex rate for ruble should be well balanced. Also, that the national exchange rate would only be controlled by the central bank as it went above the upper or lower bounds of the floating forex rate; and that the more open the Russian national currency, the better and that it would help the country’s economy to respond in a more effective and timely manner.
Though Russia is one of the largest exporters of oil, its currency is not strongly correlated with oil prices due to continuing political uncertainty in Russia.
Additional Resources
CFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst.
In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional resources will be very helpful:
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https://www.wilsoncenter.org/publication/the-second-currency-the-soviet-union-the-use-checks-valuta-rubles-1978
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en
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The Second Currency in the Soviet Union: On the Use of Checks in "Valuta-Rubles" (1978)
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Washington, D.C.: Woodrow Wilson International Center for Scholars; Kennan Institute Occasional Paper Series #32, 1978. PDF 18 pages.
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en
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/core/misc/favicon.ico
|
Wilson Center
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https://www.wilsoncenter.org/publication/the-second-currency-the-soviet-union-the-use-checks-valuta-rubles-1978
|
“A Vivid Representative of the New Thinking in China after the Death of Mao”: Aleksandar Novačić Recalls a Meeting With Hu Yaobang
Kennan Institute
The Kennan Institute is the premier US center for advanced research on Eurasia and the oldest and largest regional program at the Woodrow Wilson International Center for Scholars. The Kennan Institute is committed to improving American understanding of Russia, Ukraine, Central Asia, the South Caucasus, and the surrounding region though research and exchange. Read more
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https://www.wsj.com/market-data/currencies
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en
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Currencies
|
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Market Data Center
|
en
|
WSJ
|
https://www.wsj.com/market-data/currencies
|
Stocks: Real-time U.S. stock quotes reflect trades reported through Nasdaq only; comprehensive quotes and volume reflect trading in all markets and are delayed at least 15 minutes. International stock quotes are delayed as per exchange requirements. Fundamental company data and analyst estimates provided by FactSet. Copyright 2019© FactSet Research Systems Inc. All rights reserved. Source: FactSet
Indexes: Index quotes may be real-time or delayed as per exchange requirements; refer to time stamps for information on any delays. Source: FactSet
Markets Diary: Data on U.S. Overview page represent trading in all U.S. markets and updates until 8 p.m. See Closing Diaries table for 4 p.m. closing data. Sources: FactSet, Dow Jones
Stock Movers: Gainers, decliners and most actives market activity tables are a combination of NYSE, Nasdaq, NYSE American and NYSE Arca listings. Sources: FactSet, Dow Jones
ETF Movers: Includes ETFs & ETNs with volume of at least 50,000. Sources: FactSet, Dow Jones
Bonds: Bond quotes are updated in real-time. Sources: FactSet, Tullett Prebon
Currencies: Currency quotes are updated in real-time. Sources: FactSet, Tullett Prebon
Commodities & Futures: Futures prices are delayed at least 10 minutes as per exchange requirements. Change value during the period between open outcry settle and the commencement of the next day's trading is calculated as the difference between the last trade and the prior day's settle. Change value during other periods is calculated as the difference between the last trade and the most recent settle. Source: FactSet
Data are provided 'as is' for informational purposes only and are not intended for trading purposes. FactSet (a) does not make any express or implied warranties of any kind regarding the data, including, without limitation, any warranty of merchantability or fitness for a particular purpose or use; and (b) shall not be liable for any errors, incompleteness, interruption or delay, action taken in reliance on any data, or for any damages resulting therefrom. Data may be intentionally delayed pursuant to supplier requirements.
Mutual Funds & ETFs: All of the mutual fund and ETF information contained in this display, with the exception of the current price and price history, was supplied by Lipper, A Refinitiv Company, subject to the following: Copyright 2019© Refinitiv. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
Cryptocurrencies: Cryptocurrency quotes are updated in real-time. Sources: CoinDesk (Bitcoin), Kraken (all other cryptocurrencies)
Calendars and Economy: 'Actual' numbers are added to the table after economic reports are released. Source: Kantar Media
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https://www.banknoteworld.com/banknotes/Banknotes-by-Country/Russia-Currency/
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en
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Russia
|
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Banknote World offers Russia currency for sale to collectors looking for a piece of Russia. Click here for collectible banknotes!
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https://www.banknoteworld.com/images/simplecms/favicon.ico
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BNWorld, Inc.
|
https://www.banknoteworld.com/banknotes/Banknotes-by-Country/Russia-Currency/
|
The Russian Ruble has been in use for centuries. The Ruble name has stayed consistent too. The design of Ruble banknotes from before the Russian Revolution consisted of the Russian Coat of Arms on the front or maybe a portrait of a Tsar, and on the back large numbers depicting the denomination and some text with an excerpt promising the notes validity. The Russian coat of arms consist of 2 double sided eagles and is still in use in many government institutions.
The Soviet Ruble replaced the former Ruble in 1917. Banknotes were historically printed by Goznak the state owned mint. The Soviet Ruble consisted of coins and banknotes. The banknote designs consisted of portraits of Vladimir Lenin and images of working class people. The banknotes themselves were actually printed in bright colors like green, blue and red. The Soviet Ruble was used by Soviet states like Ukraine, Lithuania, Tajikistan, Uzbekistan and Georgia. After the dissolution of the USSR the majority of Soviet satellite states started using their own national currency. In 1998 the Ruble was redenominated and it’s the current series in circulation.
Modern Russian banknotes consist of a modest design. They follow the traditional pattern of historic monuments or statues on the front and back. The denominations range from 5 to 2,000 Rubles. The recent commemorative releases of 100 Rubles for the 2014 Sochi Winter Olympics and 100 Rubles for 2018 FIFA World Cup are a fresh breath of air from normal circulating banknotes because they are very colorful with intricate and modern designs. They even have a QR code which can be scanned to authenticate its authenticity.
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https://link.springer.com/article/10.1007/BF01267748
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Regional trade and foreign currency regimes among the former Soviet Republics
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https://media.springernature.com/full/springer-static/cover-hires/journal/10644
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1995-02-20T00:00:00
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The paper examines the problems arising from the adoption of national currencies in former Soviet Republics, and advances proposals to avoid excessive trad
|
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|
/oscar-static/img/favicons/darwin/apple-touch-icon-92e819bf8a.png
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SpringerLink
|
https://link.springer.com/article/10.1007/BF01267748
|
Bahry, D. (1987),Outside Moscow: Power, Politics and Budgetary Policy in the Soviet Republics, New York, Columbia University Press.
Bennett, A.G.G. (1993), ‘The operation of the Estonian Currency Board’,IMF Staff Papers 40 (2), June, 451–470.
Bofinger, P. (1990), ‘A multilateral payments union for Eastern Europe?’BNL Quarterly Review 176; 69–98.
Bofinger, P. (1991), ‘Options for a new monetary framework for the area of the Soviet Union’, London (mimeo).
Bofinger, P., Svindland, E. and Thanner, B. (1993), ‘Prospects of the monetary order in the republics of the FSU’, in CEPR (1993).
Brabant J.M. van (1991), ‘Key problems of creating a Central European Payments Union’,BNL Quarterly Review 177, 119–149.
Center of Economic Policy Research (1993),The Economics of New Currencies, London, CEPR.
Commission of the European Communities (1990), ‘Stabilization, liberalisation and devolution: Assessment of the economic situation and reform process in the Soviet Union’,European Economy 45, December.
Daviddi, R. (1992), ‘From the CMEA to the ‘Europe Agreements’. Trade and aid in the relations between the European Community and Eastern Europe’,Economic Systems 16(2), 269–294.
Daviddi, R. and Espa, E. (1989), ‘The economics of rouble convertibility. New scenarios for the Soviet monetary economy,BNL Quarterly Review 171, 441–467.
Daviddi, R. and Espa, E. (1990), ‘Macroeconomic reform in USSR and rouble convertibility’ in: Cardani, A. and Noera, M. (eds.)Economic Reform in the Soviet Union — Some Guidelines for Business, LIMI — Euromobiliare, Occasional Papers, Milan, 1991, pp. 13–28.
Daviddi, R. and Espa, E. (1992a), ‘Foreign aid and payments agreements in Central and Eastern Europe’,Economic Notes 21(1), 15–38.
Daviddi, R. and Espa, E. (1992b), ‘Trade and currencies in the monetary disintegration of the Soviet Union’, Paper presented to the 2nd Conference of the European Association for Comparative Economic Studies (EACES), Groningen, The Netherlands, 26–28 September (mimeo).
Daviddi, R. and Espa, E. (1993), ‘Regional trade and foreign currency regimes among the former Soviet Republics’, European University Institute — European Policy Unit,Working Paper, No. 93/4, June.
Daviddi, R., Espa, E. and Uvalic, M. (1992), Currencies in transition. The road towards convertibility in Poland, Russia and Yugoslavia’Rassegna Lavori ISCO, n. 18.
Dornbusch, R. (1991), ‘A payments mechanism for the Soviet Union and Eastern Europe’, in: Gros, D., Pisani-Ferry, J. and Sapir A. (eds.) (1992), ‘Inter-state economic relations in the former Soviet Union’, Brussels, CEPSWorking Document 63, 31–40.
EBRD (1993),Annual Economic Review 1992, London, EBRD.
The Economist (1992), ‘The rouble zone. Behind the facade’,Economist, 19 September, p. 92.
Eichengreen, B. (1993), ‘European Payments Union’,Economic Policy 15, 309–346.
Fischer, S. (1992), ‘Stabilization and economic reform in Russia’,Brokings Papers on Economic Activity 1, 77–111.
Goldberg, L.S., Ickes, B.W. and Ryterman, R. (1993), ‘Departures from the rouble zone: the Implications of adopting independent currencies’, New York University, C.V. Starr Center for Applied Economics,Research Report, No. 93-17, April.
Gros, D. (1991a), ‘A Soviet Payments Union?’, Brussels, CEPSWorking Document, 58, November.
Gros, D. (1991b), ‘Regional disintegration in the Soviet Union: economic costs and benefits’,Intereconomics, 26(5): 207–213.
Gros, D., Pisani-Ferry, J. and Sapir, A. (eds.) (1992), ‘Inter-state economic relations in the former Soviet Union’, Brussels, CEPSWorking Document 63, 63–71.
Hanson, P. (1992), ‘The end of the ruble zone?’,RFE/RL Research Report 1(30), 46–48.
Hansson, A. and Sachs, J. (1992), ‘Crowning the Estonian kroon’,Transition 3(9), 1–3.
Hansson, A.H. (1993), ‘The Estonian kroon: experiences of the first year’, in CEPR (1993).
Havrylyshyn, O. (1992), ‘Why and when new currencies?’, in: Gros, D., Pisani-Ferry, J. and Sapir, A. (eds.) (1992), ‘Inter-state economic relations in the former Soviet Union’, Brussels, CEPSWorking document 63, 72–77.
Havrylyshyn, O. and Williamson, J. (1991),From Soviet disUnion to Eastern Economic Community?, Washington, Institute for International Economics.
Hernandez-Cata, E. (1992), ‘Note on the introduction of a national currency’, in: Gros, D., Pisani-Ferry, J. and Sapir, A. (eds.) (1992). ‘Inter-state economic relations in the former Soviet Union’, Brussels, CEPSWorking document, 63, 63–71.
Hernandez-Cata, E. (1993), ‘The Introduction of national currencies in the former Soviet Union: options, policy requirements and early experience’, in CEPR (1993).
IMF (1992),Common Issues and Interrepublic Relations in the Former USSR, Washington, IMF.
Kenen, P. (1990), ‘Transitional arrangements for trade and payments among the CMEA countries’,IMF Staff Papers 38(2), 235–267.
Lupinovich, E. and Malinka, V. (1992), ‘Economic relations of Russia and the former USSR republics’, paper presented at the 2nd Conference of the European Association for Comparative Economic Studies (EACES), Groningen, The Netherlands, 26–28 September (mimeo).
Michalopoulos, C. and Tarr, D. (1992), ‘Transitional trade and payments arrangements for states of the former USSR’, Washington, World Bank (mimeo).
McKinnon, R. (1992), ‘Taxation, money and credit in a liberalizing socialist economy, in: Clague, C. and Rausser, G.C., (eds.)The Emergence of Market Economies in Eastern Europe, Oxford, Blackwell.
Nordhaus, W.D. (1992), ‘Comments and discussion’,Brooking Papers on Economic Activity 1, 116–123.
Nuti, D.M. (1991), ‘How quickly should convertibility be introduced? A comment on Friedrich Levcik and Jacques J. Polak’, in: Williamson J. (ed.)Currency Convertibility in Eastern Europe, Washington, Institute for International Economics, pp. 48–55.
Nuti, D.M. (1992). ‘Multilateral payment mechanisms for the former Soviet Union. A comment’, Brussels (mimeo).
Nuti, D.M. and Pisani-Ferry, J. (1992), ‘Post-Soviet issues: stabilization, trade and money’, in: Dornbusch, R. and Bofinger, P. (eds.)The Economic Consequences of the East, London, CEPR.
PlanEcon (1992), ‘What do the Former Soviet republics export and import: initial review of commodity composition of trade’,PlanEcon, Report VIII(26), June.
PlanEcon, Report (1993),Russian Economic Monitor, Nos. 44–45, December.
Schiffer, J.R. (1989),Soviet Regional Economic Policy, London, Macmillan.
Senik-Leygonie, C. and Hughes, G. (1992). ‘Industrial profitability and trade among the former Soviet republics’,Economic Policy 15, 353–386.
Slay, B. (1992), ‘Introducing national currencies: Causes and consequences’,RFE/RL Research Report 1(30), 49–52.
United Nations — Economic Commission for Europe (1991).Economic Bulletin for Europe, n. 43, Geneva, United Nations.
United Nations — Economic Commission for Europe (1992).Economic Survey of Europe in 1991–92, Geneva, United Nations.
United Nations — Economic Commission for Europe (1993).Economic Survey of Europe in 1992–1993, Geneva, United Nations.
Williamson, J. (1992),Trade and Payments after Soviet Disintegration, Washington, Institute for International Economics.
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https://www.cbr.ru/eng/cash_circulation/
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en
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Cash Circulation
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Cash — banknotes and coins — has the functions of currency and means of payment.
Pursuant to Article 75 of the Constitution of the Russian Federation, the Russian currency unit is the ruble. The Bank of Russia is the sole issuer of currency. The introduction and issue of another currency are prohibited in the Russian Federation.
Despite the rapid growth of cashless payments, cash money, i.e., banknotes and coins, remains an important part of the financial system and an important part of national identity and culture.
The Bank of Russia issues commemorative coins dedicated to significant dates, to Russian scientists, artists and cultural figures, to Russian regions, and to many other subjects.
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https://online.norwich.edu/online/about/resource-library/consequences-collapse-soviet-union
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en
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Consequences of the Collapse of the Soviet Union
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https://online.norwich.edu/online/about/resource-library/consequences-collapse-soviet-union
|
The Fall of the Soviet Union
For nearly three decades, the Berlin Wall was a tangible representation of the so-called Iron Curtain and the political divisions in Europe. When Mikhail Gorbachev took control of the Union of Soviet Socialist Republics (USSR) in 1985, he did so with the intention of revamping the country’s economy and government. He dismantled the secret police and introduced perestroika (economic restructuring) in an attempt to begin mending relationships with Western European countries and the United States. By studying the consequences of the collapse of the USSR, students today can gain an understanding of how the end of the Cold War affected U.S. and Soviet relationships, and how it led to the current political and economic climate between the two countries.
In order to understand the consequences related to the collapse of the Soviet Union, it is critical to first examine the overarching causes for the USSR’s downfall. Gorbachev’s loosening of governmental power created a domino effect in which Eastern European alliances began to crumble, inspiring countries such as Estonia, Lithuania and Latvia to declare their independence. The Berlin Wall fell on November 9, 1989, leading East and West Germany to officially reunite within a year, ending the Cold War. Once the Berlin Wall fell, citizens in Eastern European countries such as Czechoslovakia, Bulgaria and Romania staged protests against their pro-Soviet governments, hastening the collapse of communist regimes across the former Soviet bloc. Other countries—such as the Republic of Belarus, the Russian Federation and Ukraine—followed suit, creating the Commonwealth of Independent States. By the end of 1989, eight of the nine remaining republics had declared independence from Moscow, and the powerful Soviet Union was finally undone. By the summer of 1990, all the formerly communist Eastern European officials had been replaced by democratically elected governments, setting the stage for the region’s reintegration into Western economic and political spheres.
The dismantling of the Soviet Union had many long-lasting effects on the global economy and the region’s foreign trade. Its downfall increased the United States’ influence as a global power and created an opportunity for corruption and crime in Russia. It also prompted many cultural changes and social upheavals in former Soviet nations and smaller neighboring communist countries. Between 1989 and 1991, the gross national product in Soviet countries fell by 20 percent, ushering in a period of complete economic breakdown.
Eastern European Economy, Economic Collapse, and Foreign Trade
By the time Gorbachev took office in 1985, the Soviet economy had been stagnant for 20 years and was badly in need of reform; to wit, the country’s gross national product (GNP) went from 5.8% in 1940 to 2.6% in 1970. Grocery store shelves were often empty, and lines for food were long. The Soviet economy historically had relied little on foreign trade because of the region’s large energy and raw material base; in 1985, exports and imports accounted for just 4 percent of the Soviet GNP. The trading the Soviet Union did engage in was mostly with communist countries, many of which were in Eastern Europe. In 1988, Soviet trade with socialist countries amounted to 62 percent of the country’s total foreign trade, while 15 percent of its foreign trade was made with Third World countries. Soviet trade with Western countries largely consisted of currency and Soviet oil exports, as well as trading one manufactured good for another (Pepsi for Stolichnaya vodka, for example).
In September 1990, Gorbachev rejected Russian economist and politician Grigory Yavlinsky’s 500-day economic reform plan, which lost the former any remaining support he had from the Soviet people, leaving him with few allies. Gorbachev’s attempts to modernize the Soviet system failed, in part, because he was unable to implement a complete overhaul, instead of making a series of minor reforms. For example, he tried to stop the production and sale of alcohol, forcing the industry underground. He also began leasing state-owned land to farmers and cut state spending on the military. Gorbachev’s continued promises that his reforms would drastically improve living conditions alienated citizens who didn’t see the promises come to fruition. Gorbachev’s failed plan for a slow, gradual economic reform negated any positive effects the reforms may have had, and the economy fully collapsed.
A few years prior, in April of 1988, Soviet and American trade delegations met in Moscow to examine possibly expanding trade relations. The Soviet government’s hope was to gain an understanding of Western management and marketing processes and learn new manufacturing skills. That same year, the Soviet Union signed a normalization agreement with the European Economic Community. Gorbachev’s economic policies of Soviet expansion and cooperation with the Western world changed the attitude of the country from one that regarded foreign trade as a means to compensate for short-term scarcities to one that considered imports to be long-term alternatives to domestic production. This helped open the door to Soviet expansion into the world market, bolstering relations with not only former Soviet bloc nations, but also Western powers such as the United States and the United Kingdom. In the mid-1990s, Russian President Boris Yeltsin and U.S. President George H.W. Bush signed trade agreements designed to make it easier for U.S. citizens to conduct business in Russia. In 1997, for the first time, Russia participated in economic discussions at the G7 summit in Denver, Colorado. The following year, Russia was integrated as a full member, and the G7 became the G8. By the early 2000s, Russian President Vladimir Putin was working to create a free-trade zone in Russia, and the country eventually joined the World Trade Organization in 2012.
Crime, Cultural Changes and Social Upheavals
The Soviet Union’s collapse not only threw economic systems and trade relations throughout Eastern Europe into a tailspin, it also produced the upheaval in many Eastern European countries and led to increased crime rates and corruption within the Russian government. When the Soviet government fell, the Russian mafia, which had struggled to survive during the height of communism, stepped in to fill the power void. Government infrastructure—ranging from basic public utilities to police services—mostly evaporated during the collapse. Additionally, government payroll services almost completely disappeared, so ex-KGB officers, police officers and Soviet Army soldiers flooded the mafia’s ranks in search of steady employment. Mafia oligarchs seized state-owned assets and enterprises throughout Russia, such as telecommunications and energy networks and industries, and the mafia extorted the public in exchange for providing security and enforcing laws wherever the Russian government was unable to. Though the current Russian administration has had some success combating organized crime, the Russian mafia is still extremely powerful and well-connected. However, in an autocratic society such as that of Russia, anyone who speaks in opposition to government corruption will be arrested, exiled or even murdered under mysterious circumstances. This oppression stymies Russia’s chances of establishing a true democracy and allows government corruption to continue to expand.
The fall of the Soviet empire also had far-reaching effects on the world as a whole, particularly among its former Soviet satellite nations. For some countries, such as Azerbaijan and Kazakhstan, oil and natural gas exports have created prosperity but have also enabled corruption. Countries such as Lithuania and Latvia underwent dramatic transformations by quickly turning to the West, adopting Western ideals and political leanings, while other countries, such as Armenia and Tajikistan, have struggled to flourish in the post-Soviet era and many citizens remain poverty-stricken while the states and their politics remain in flux.
The Soviet Union’s collapse also affected countries outside the former Soviet bloc; for instance, since the end of the Cold War, China has expanded to become a major world superpower and the European Union has extended its influence into areas that Moscow once controlled. In the quarter-century since the Soviet Union collapsed, U.S.-Russia relations have been tenuous. While the United States under President Bill Clinton provided assistance to Russia, policymakers at home feared Russia could re-emerge as an enemy if nationalists were allowed to regain power.
US Power
While the United States was able to become the dominant global superpower in the years following the Soviet Union’s collapse, Russia has gained ground in the past several years. A recent study by the U.S. Army War College’s Strategic Studies Institute indicates that the United States’ power is declining because the world is entering a new phase in which the authority of traditional governments worldwide is destabilizing, stating that the United States “can no longer count on the unassailable position of dominance, supremacy, or pre-eminence it enjoyed for the 20-plus years after the fall of the Soviet Union.” The dissolution of the USSR left the U.S. as the only true world superpower, freeing the U.S. government from the constraints imposed by the existence of any threat from a powerful rival. This allowed the U.S. government to intervene militarily and otherwise in foreign countries without fear of major retaliation.
Though the collapse of the Soviet Union allowed the United States to gain power, recent years have seen Moscow take a stronger stance in world affairs—by forgiving $10 billion of Soviet-era debt due from Pyongyang, for example, and selling oil to North Korea—in an attempt to, as Samuel Ramani, journalist and international relations expert, noted in the Washington Post, “once again project itself as a global power.” Achieving that superpower status, according to Ramani, would make it far easier for Russia to directly influence conflicts across the world.
By studying the immediate effects of the Soviet Union’s collapse, and keeping current on the effects of post-Soviet development, historians and students can understand how the end of the Cold War, Russia’s fall from dominance and its recent bid to return to the stage as a global power have all affected the United States and the course of the current geopolitical climate.
Learn More
Norwich University is an important part of American history. Established in 1819, Norwich is a nationally recognized institution of higher education, the birthplace of the Reserve Officers’ Training Corps (ROTC) and the first private military college in the United States.
With Norwich University’s online Master of Arts in history, you can enhance your awareness of differing historical viewpoints while developing and refining your research, writing, analysis and presentation skills. The program offers two tracks—American history and world history—allowing you to tailor your studies to your interests and goals.
Sources:
Fall of Communism in Eastern Europe, 1989, Office of the Historian
Why the USSR Collapsed Economically, Investopedia
Fall of the Soviet Union, History
After the Collapse Russia Seeks Its Place as a Great Power, The New York Times
A globe redrawn, The Economist
Twenty Years after the Collapse of the Soviet Union: Russian and East European Literature Today, World Literature Today
Perestroika and the Soviet Economy, On This Day
Soviet Union Chapter 15. Foreign Trade, Country Data
Russia Trade Policy, PBS
Post-Soviet world: what you need to know about the 15 states, The Guardian
Critical Issues Facing Russia and the Former Soviet Union: Governance and Corruption, American Security Project
Soviet Collapse Altered Ongoing World Power Balance, VOA News
Russia's power play in North Korea aimed at both China and US, CNN
Treasury Targets Chinese and Russian Entities and Individuals Supporting the North Korean Regime, U.S. Department of the Treasury
25 Years After the Fall, U.S. News & World Report
Russia Resurgent, Slate
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https://history.princeton.edu/about/publications/ruble-political-history
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en
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The Ruble: A Political History
|
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Department of History
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https://history.princeton.edu/about/publications/ruble-political-history
|
A groundbreaking history of Russia, from empire to the Soviet era, viewed through the lens of its money.
Money seems passive, a silent witness to the deeds and misdeeds of its holders, but through its history intimate dramas and grand historical processes can be told. So argues this sweeping narrative of the ruble's story from the time of Catherine the Great to Lenin.
The Russian ruble did not enjoy a particularly reputable place among European currencies. Across two hundred years, long periods of financial turmoil were followed by energetic and pragmatic reforms that invariably ended with another collapse. Why did a country with an industrializing economy, solid private property rights, and (until 1918) a near perfect reputation as a rock-solid repayer of its debts stick for such a prolonged period with an inconvertible currency? Why did the Russian gold standard differ from the European model? In answering these questions, Ekaterina Pravilova argues that politics and culture must be considered alongside economic factors. The history of the Russian ruble offers an opportunity to explore the political reasons behind the preservation of a supposedly backward financial system and to show how politicians used monetary reforms to block or enact political transformations.
The Ruble is a history of Russia written in the language of money. It shows how economists, landowners, merchants, and peasants understood, perceived, and used financial mechanisms. In her sweeping account, Pravilova interprets the well-known political events of the eighteenth to early twentieth centuries — wars, attempts at constitutional transformations, revolutions — through the ideas and politics of currency reforms and offers a new history of Russia's imperial expansion and collapse.
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https://www.elibrary.imf.org/view/journals/024/1950/002/article-A002-en.xml
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The Soviet Price System and the Ruble Exchange Rate
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1950-01-01T00:00:00
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SINCE MARCH 1, 1950, there has been much discussion of the significance of the revaluation of the ruble exchange rate and the simultaneous adjustment of retail prices in the U.S.S.R. which occurred on that date. An answer to the questions which have arisen requires an analysis of the price system in the U.S.S.R. and of the meaning of the ruble exchange rate in U.S.S.R. international economic relations. This study attempts to analyze these issues and, in particular, their relation to the question of the assumption of international functions by the ruble.
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en
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IMF eLibrary
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https://www.elibrary.imf.org/view/journals/024/1950/002/article-A002-en.xml
|
Price System in the U.S.S.R.
Price formation
The economy of the U.S.S.R is a money economy. Prices are expressed in rubles, and payments by producers and consumers are made in money, although there are exceptions to this rule. As in capitalist countries, some services are provided free of charge; in the U.S.S.R., however, these services represent a larger share of consumers’ real income than in any capitalist country.
Except on “kolkhoz markets,”1 price formation is not automatic. There are price lists for all goods and for services which are not given free of charge, and transactions concluded at other than the fixed official prices are illegal.
The technique of cost calculation in individual enterprises may be similar in the U.S.S.R. to that used in capitalist countries, but the economic mechanism behind the calculation is different. There are no prices for the factors of production which may be summarized under the general term “nature,” and prices for capital are largely absent. Inequalities in average costs of production caused by differences in natural conditions, or in the skill of management, are not allowed to become a source of quasi-rent. An industrial enterprise in the U.S.S.R. consists generally of several plants, whose managers perform only technological functions. The management of the enterprise credits each plant for its output at its planned average costs (based mostly on actual past performance) plus a certain mark-up for profits, which at the most amounts to 10 per cent. The enterprise delivers the output of its plants to a central selling organization for the region at prices which result from averaging the costs and profits of the individual plants. The central selling organization, in turn, sells at prices equal to the average of costs plus profit mark-up for all enterprises in the region. Variations in these quasi-arbitrary uniform selling prices, which may be described as “delivery prices,” are usually allowed only between regions.
Demand and supply of any producers’ good in short supply are not adjusted by increasing its price above average production costs plus a mark-up for profits, but through an arbitrary reduction by the planning authorities of the quantities requested by individual enterprises (in their original “microscopic” plans). Occasionally, the central economic authorities increase the profit mark-up for individual enterprises or groups of enterprises to enable them to undertake rationalizing investments or to extend their productive capacity if they are considered to be working under specially favorable conditions and to have a skilled management. However, this is not done with the aim of adjusting effective demand to existing supply conditions.
This method of pricing is similar to that used by capitalist countries in wartime.2 It carefully avoids the marginal approach; indeed, the marginal principle is regarded in the U.S.S.R. as heretical, and Soviet economists are careful not to propose anything which appears to be influenced by it. Nevertheless, even in the Soviet economy there is some evidence of the application of the marginal principle. Each manager of a Soviet enterprise in making technological decisions is likely to act in a way that implies adherence to the marginal principle, just like an entrepreneur in a capitalist country. The factors of production of which the supply is determined for the Soviet “entrepreneur” are, however, much more numerous than for his counterpart in a capitalist country. Nor can he regulate the output of his plant in the same way as a capitalist entrepreneur. As a result of the generally narrower scope for the application of the marginal principle than in developed capitalist countries, the allocation of productive resources may be presumed to be objectively less economic in the U.S.S.R. than in such capitalist countries.
The prices of producers’ goods also include turnover taxes. But the tax rates for producers’ goods are very low, and the rates on producers’ goods which are used in the production of other producers’ goods are lower than on those which are next to the stage of consumers’ goods. The rates for a single commodity are also believed to be different, according as the commodity is to be used in the production of producers’ or consumers’ goods.
Turnover, or rather sales, tax rates on consumers’ goods, on the other hand, are very high,3 sometimes constituting as much as 90 per cent of the selling price. Even on goods which in British terminology would be called “utility goods,” they are frequently as high as 75 per cent. In 1940, the turnover tax constituted about 61 per cent of the total value of consumers’ goods sold to the public; for 1941, a percentage of 73 was planned.4
Turnover taxes are used to influence consumer demand so that it exerts little influence on the structure of production of producers’ goods. If the scales of preference of those who control economic planning differ from consumers’ preferences, the turnover tax may be used to adjust the demand for any good to an arbitrarily regulated supply. Even for goods in which the planners take no interest, but permit production in proportions regulated by consumers’ choices, producers’ interpretation of consumers’ wishes may be obscured by tax rate manipulations. Since, moreover, consumers are unable by their individual actions to determine either the rate or the volume of savings, “consumers’ sovereignty” is for the most part absent in the Soviet economy.
This method of pricing, largely independent of the marginal principle, gives the Soviet Government power to introduce, almost overnight, changes in the level of prices or in the price structure. Such over-all changes in price lists have occurred several times in Soviet history. In some instances, price adjustments had become necessary as a result of conditions created by inflation or other forms of economic mismanagement; in others, they seem to have been the inevitable outcome of the normal working of the Soviet economic organization.
Prices and economic development
The Soviet economy may be said to be in equilibrium at a given national income level and a given price level of consumers’ goods if the prices of all elements in the cost calculation have been established so as to assure equality between the value of the current production of consumers’ goods and total consumers’ outlays, which in the U.S.S.R. are almost identical with total wage earnings minus loans to the state and insignificant voluntary private savings. If—with given preference scales of consumers and of those who ultimately decide about economic planning,5 given techniques of production, and given conditions of economic and social structure—production and government expenditure expand at the same rate as population, the prices of the elements in the cost calculation and of consumers’ goods may remain unchanged. As soon, however, as either the technique of production, the economic and social structure, preference scales, or per capita production of consumers’ goods changes, cost elements and/or prices of consumers’ goods must also change.
In fact, in the U.S.S.R. national income, techniques of production, and economic structure change rather rapidly. Since the Soviet Government also aims at distributing increments in the national income so that per capita production of consumers’ goods may increase, frequent adjustments in wage earnings and other cost elements and/or in prices of consumers’ goods are therefore to be expected.
If the supply of consumers’ goods increases, equality between supply of and demand for these goods—one of the conditions of general equilibrium—may be maintained by means of a piece-work system of pay, efficiency premiums, and increases in basic wage rates. If total earnings increase in a certain period more or less than the supply of consumers’ goods, the prices of these goods should be changed. Before the war, the Soviet economy was subjected to continuous (although receding) inflationary pressures caused by imperfections in economic management, and there were frequent upward adjustments in the prices of consumers’ goods. Since the war, however, as a result of reconstruction, large imports of machinery, increasing supplies of raw materials, and improvements in the skill and organization of labor, the per capita supply of consumers’ goods has increased rapidly. At the same time, actual average costs of production have been continuously and significantly decreasing, and the cost elements, adapted to the previously existing conditions, have become more and more fictitious. In a highly centralized planning system there is, naturally, strong resistance to frequent changes in the cost elements and in the prices of consumers’ goods. It is a great convenience in planning to operate with stable “values.” In contrast to the actual tempo of economic development, the Soviet system of economic management may therefore in this respect be regarded as rigid.
Under dynamic conditions, planning which operates on values fixed in the past gradually becomes ineffective, and after a certain time, during which only sporadic and uncoordinated adjustments are made beneath the unchanged surface of fixed prices, over-all changes become necessary. Planned costs must be revised so as to reinstate economic incentives in enterprises, and wages and/or prices of consumers’ goods must be changed so as to restore equilibrium between the production of consumers’ goods and the demand for them, in conformity with whatever policy determines the share of consumption in the national income.
Since the monetary and price reform of December 1947, there have been three such major adjustments, each involving an over-all reduction in prices. The method of adjustment by increasing wages and salaries has not been used because it seemed less convenient for planning purposes. Changes in wages would seriously distort all the established elements of cost calculation.
Technique of price reduction
A description of the techniques used in the price reduction of March 1950 and of its financial implications cannot be found in the Soviet publications which are available. They may be deduced, however, from the principles of the Soviet price and financial system.
A reduction in the prices of consumers’ goods in the U.S.S.R. can be accomplished either by decreasing production costs, by lowering the turnover tax, or by a combination of the two, and either with or without a reduction in earnings.
Actual costs of production decrease gradually. As long as planned delivery prices remain unchanged, a reduction in costs results only in increased extra profits, i.e., profits above the established mark-up. An adjustment of planned costs to the actual level of costs is permitted only when the planning authorities so decide. Then if turnover taxes remain unchanged, the retail prices of consumers’ goods must be reduced in accordance with the reduction in costs of production.
The reduction of prices in the U.S.S.R. on March 1, 1950 involved an estimated average fall of 15 to 20 per cent. Under the assumption that, on the average, the turnover tax accounts for 60 per cent of retail prices, such a reduction in prices would require a reduction in total costs of production (including a mark-up for profit) by 37.5 to 50 per cent, if the yield of the turnover tax were to remain unchanged. The actual reduction in production costs is unlikely to have been of this magnitude, since there had been a reduction in prices of consumers’ goods and in costs as recently as March 1, 1949. Neither can it be assumed that the price reduction was effected solely by reducing turnover tax rates at unchanged costs of production. With unchanged costs, prices—of which 60 per cent was accounted for by turnover tax—could have been reduced by this means by 15 to 20 per cent only if it were possible to reduce turnover tax rates by 25 to 33 per cent. Such a reduction would have been either too burdensome for the state budget, or would have had to be associated with some new revenue-increasing measures, which would mean a major change in the financial system of the U.S.S.R., about which nothing has been heard. A change of this kind might be deduced if costs of production were to fall while “delivery prices” remain unchanged, the price reductions then being effected by cuts in the turnover tax rates. This would mean the legalization of extra profits in the form of increased profit mark-ups. The Soviet economic authorities, however, aim at the maintenance of rather low profit margins, to prevent managers of enterprises from relaxing their efforts to economize on expenses. (Actual costs in excess of delivery prices may cause an investigation into the work of the manager, followed by sanctions.) Since part of profits may also be used for investment in the enterprises where the profits originate, increases in profits would mean an expansion of decentralized investments with the eventual possibility of far-reaching changes in the planning system.
Actually, it seems probable that in the changes of March 1950 both techniques for reducing prices were used. Planned delivery prices were reduced and turnover tax rates cut. The application of these techniques means either an actual decrease in government revenue or an increase at a declining rate. According to the Soviet official statement, the recent cut in prices will reduce the 1950 expenditures of the population by 110 billion rubles; 80 billion will be saved through lower prices in state stores and 30 billion through price reductions on kolkhoz markets6 and in cooperative stores. This statement probably means that, if prices had remained unchanged (i.e., equal to those of 1949), the population of the U.S.S.R. would have spent in 1950 from their money incomes, increased according to plan, 110 billion rubles more than at the reduced price level. The 80 billion rubles “lost” by state stores would represent 18 per cent of the total revenue planned in the 1949 budget. Even on the assumption that the increase in the national income (at 1949 prices) for 1950 were 20 per cent, and that—if prices had remained at the 1949 level—the percentage increase for state revenue were the same as for the national income, the reduction in anticipated revenue that would be necessary if the price reduction had been only at the expense of current government proceeds would be so large as to be very unlikely. Any increase in the national income is usually divided between consumption and investment (the latter is financed mostly by the state budget) in such a way as to ensure a significant increase in investment, greater than the increase in consumption. The increase in the national income of 1950 would have to be very large if government revenues and, consequently, also investment were to increase significantly, in spite of a cut in the rate of increase in government revenues so severe that, if it had been applied in 1949, actual revenues would have fallen by almost one fifth.
This seems to suggest that the reduction in prices may have been made possible in part by a revision in workers’ efficiency rates, basic wage rates probably remaining unchanged. Sporadic revisions of this kind are possible in view of changes in methods of production (e.g., increases in capital equipment) which increase the efficiency of labor.
However, insofar as the reduction in retail prices was achieved through a cut in turnover tax, it was probably carried out at the expense not only of current budgetary revenues, but also of the revenues of the previous year (1949). Inventories were probably gradually accumulated before prices were reduced (which implies a relative reduction in government revenues during the period of accumulation and also a volume of production in excess of current sales to the public). The expansion in consumers’ demand in response to reduced prices may be satisfied by a gradual depletion of inventories until current production increases sufficiently. In view of these considerations, it seems possible that the reduction of prices may have been achieved without any significant reduction in the earnings of the population.
The relative importance, in practice, of these techniques for reducing prices cannot be evaluated. However, it may be assumed that the combined effect of increased national income and reduced prices will be an increase both in real per capita consumption (although probably not to the full extent of the price reduction) and in government revenue and investment.
The reduction of prices of consumers’ goods by various percentages (necessarily arbitrarily selected, although an analysis of the market certainly preceded this action) will cause shifts in demand. Further price adjustments, covering a wide range of goods, are therefore to be expected. The reduced prices, however, may have been set at such a level that the aggregate value of consumers’ goods available (after previously accumulated extra inventories have been sold) will for some time be smaller than the amount of money which consumers would be willing to spend on consumption goods during the same period. This would have effects similar to those of an inflation. In such a case, the necessity of adjusting prices to consumers’ preference scales (while the general price level remained unchanged) would be less strongly felt, since under inflationary conditions almost any combination of goods can be sold easily, even though relative prices are not correctly fixed.7
Price spread
As pointed out above, costs of production under the Soviet pricing system do not include rent or interest, and in industries producing capital goods they include only small profits (compared with those which would be considered as normal in capitalist countries). What is not included by state enterprises in the costs of production is collected by the state in the form of high turnover taxes on consumers’ goods. Turnover taxes are also a means by which the quantity of consumers’ goods which is demanded is made equal to the quantity supplied. The volume of output of consumers’ goods is set by the central planning authorities, and may be safely assumed to be smaller than would be produced if a fair degree of consumers’ sovereignty existed in the Soviet Union. Turnover taxes are therefore a means of collecting a significant part of state corporate savings, which correspond to investments decided by the planning authorities.
The result of this pricing system is a larger discrepancy than is usual in capitalist countries between the delivery prices of all goods—which roughly correspond to wholesale prices charged by producers in capitalist countries—and the retail prices of consumers’ goods. For example, for bread this discrepancy amounted before the war to about 75 per cent of the retail price, which is probably more than the difference between the producers’ price and the retail price in any capitalist country. In comparison with the situation in capitalist countries, there are, therefore, in the U.S.S.R. one group of goods which are relatively “cheap” and another which are relatively “expensive.” To the relatively “cheap” category belong all producers’ goods and consumers’ goods at delivery prices, while to the relatively “expensive” group belong all consumers’ goods at the retail stage of distribution. The difference between the price levels of these two groups of goods may be called the relative price spread or, more briefly, the price spread.
The relative price spread in the U.S.S.R., in comparison with, say, the United States, indicates the extent to which the difference in the Soviet Union between the wholesale (delivery price in the U.S.S.R. and wholesale factory price in the U. S.) and retail prices of representative baskets of goods and services is greater than in the United States. If prices of baskets of “cheap” goods in the United States and the U.S.S.R. are denominated “Aa” and “Ar,” respectively, and prices of “expensive” goods “Ba” and “Br,” the following formula may be used for measuring the relative price spread in percentage terms:
100 - ( Ar Br : Aa Ba ) 100
It is, however, always possible to assume a hypothetical exchange rate for the Soviet currency which will make Aa equal to Ar. The formula for the relative price spread then becomes
100 ( Br - Ba ) Br
A comparison of the price situations in capitalist countries may also reveal the existence of relative price spreads there. Differences in taxation, in social insurance systems, and in customs duties, may create price spreads for various groups of goods and services, and restrictions on the mobility of factors of production and monopolies help to maintain these spreads.8 These spreads, together with the effects of differences in natural resources, may make one country “cheap” or “expensive,” depending on the groups of goods used for comparison, and thus affect the commodity composition of exports and imports. However, such price spreads as exist between capitalist countries are not nearly so extensive as in the U.S.S.R.
The formula suggested above cannot in practice be used to calculate the actual price spread in the U.S.S.R.—e.g., in comparison with the United States—since information on prices in the U.S.S.R. for the “A” group of goods is lacking, and on prices of the “B” group of goods is very limited. The price spread may, however, be estimated indirectly. The turnover tax content in the retail prices of consumers’ goods is known to have been 61 per cent in 1940 and to have been planned at 63 per cent for 1949. It may be assumed to amount to 60 per cent at present. The remaining 40 per cent represents delivery prices plus costs of distribution. If costs of distribution in the U.S.S.R. represent the same percentage of delivery or wholesale factory prices as in the United States, the price spread in the U.S.S.R. relative to the United States would correspond to the turnover tax content in the aggregate value of consumers’ goods. In fact, although the bureaucratic distribution apparatus of the U.S.S.R. works clumsily, the distribution costs in the Soviet Union may be relatively lower than in the United States, because profits of trading organizations are set very low. There are, moreover, in the United States, some price-increasing taxes which correspond to part of the 60 per cent turnover tax content in the Soviet prices of consumers’ goods. The relative price spread may therefore be assumed to be somewhat less than 60 per cent.
Under the conditions of a market economy, an estimate such as that made above would be fairly representative of the price spread for all goods of category “A.” But in the U.S.S.R. the price mechanism does not fulfill its traditional function; the allocation of factors of production between the industries producing capital goods and those producing consumers’ goods is not motivated by relative profitableness. It is, therefore, possible for the price spread for capital goods to differ significantly from that for consumers’ goods, and there seems to be convincing evidence that this is actually the case. Profits in industries producing capital goods are set at a much lower level than profits in industries producing consumers’ goods, the labor assigned to the former group of industries is generally better trained, and the machinery used there is more extensive and modern. Consequently, the price spread between capital goods and raw materials at the “delivery” stage and consumers’ goods at the retail stage may be larger than that between consumers’ goods at the “delivery” and the retail stages.
Meaning of the Exchange Rate of the Ruble
Exchange rate and the price spread
In order to interpret the real meaning of the ruble exchange rate in its relation to the Soviet price system, let the assumption first be made that the Soviet authorities make decisions concerning international transactions on the basis of existing domestic and foreign prices, as is done in free competitive economies.
In free competitive economies, the difference between wholesale and retail prices does not vary very much from country to country; in other words, any relative price spread that may exist cannot be of great significance. If an exchange rate is allowed to have its full effect upon foreign trade transactions (i.e., without direct or indirect premiums or surcharges), this in itself tends to limit the size of any price spreads. And, in turn, if price spreads are small, this facilitates the use of single exchange rates in economic relations with other countries. The relative price spread for the U.S.S.R., however, is large, and this has a direct bearing on the foreign value of the Soviet currency.
Soviet merchandise exports and imports are composed of goods of “A” price category. Even consumers’ goods are sold to export organizations at delivery prices. Therefore, if prices are to be used as a guide in the decisions of the Soviet foreign trade organizations, the exchange rate used in foreign trade transactions would have to conform to the “A” price level. A similar assumption applied to consumers’ goods and services sold to foreigners inside the U.S.S.R. would mean that the exchange rate applied to foreign travellers, businessmen, and diplomats should conform to the “B” price level. Because of the price spread discussed in the preceding section, these two exchange rates cannot be identical. As long as the present system of pricing is maintained in the U.S.S.R., and on the assumption that exchange rates should conform to domestic and foreign prices, there should therefore be two exchange rates for the ruble.
The realization that no single exchange rate can fully indicate the relationship between the values of the Soviet and other currencies is of great significance for many comparisons between Soviet and capitalist economic magnitudes. Economists sometimes use prices of consumers’ goods for estimating the proper exchange rates of various countries. Because there are no significant relative price spreads among those capitalist countries which do not have extensive economic controls, the exchange rate thus estimated may approximately represent the price relations of all goods in such countries. Such an exchange rate, however, would not be proper for an estimate of, for example, the dollar value of the budgetary investment appropriations in the Soviet Union. Estimates and analyses of the national income of the U.S.S.R. may also lead to erroneous conclusions if the peculiarity of the Soviet economic system discussed above is not taken into account.
On the assumption that the decisions of Soviet authorities concerning international transactions are based on existing domestic and foreign prices, and that there are generally favorable conditions for the development both of exports and of tourism, the existence of a single ruble exchange rate would result in smaller foreign exchange proceeds than if there were two exchange rates (or three, if the relative price spread between prices of capital goods and delivery prices of consumers’ goods is significant).
In fact, after July 1, 1950 there was to be only one exchange rate for the Soviet currency, 4 rubles to 1 U. S. dollar. Until June 30,1950, there were two exchange rates: one official, 4 rubles per U. S. dollar, which followed from a declared gold content of the ruble, and the other preferential, 6 rubles per U. S. dollar, which was called the “diplomatic” exchange rate. The existence of two exchange rates, however, did not necessarily mean that there was conformity between exchange rates and prices in the U.S.S.R. and abroad; nor did it prove that decisions concerning individual international transactions were based on prices in the U.S.S.R. and abroad. Even an approximate conformity between exchange rates and price levels in the U.S.S.R. and abroad could merely suggest, but not prove, that exchange rates were actually applied to Soviet individual international transactions. There was, in fact, no such conformity; and there is no conformity between the present single exchange rate of the ruble and the price levels of either “A” or “B” groups of goods. This will be shown in the last section of this paper. In the present section, only the problem of the conformity between exchange rates and prices in individual transactions will be discussed.
The relevance of the exchange rate
Foreign trade in the U.S.S.R. is a state monopoly. Its purpose, apart from the achievement of the highest possible prices for exports and the lowest possible prices for imports,9 is, as has been explicitly stated by those responsible for Soviet economic policy, to shield the domestic economy from external influences.
Foreign trade organizations buy in the domestic market goods destined (by the economic plan) for export, and sell imported commodities to Soviet enterprises at domestic delivery prices. (The prices of imported goods may be set more arbitrarily by import organizations, since in many cases they are very imperfect substitutes for goods produced domestically.) Export goods are sold and import goods bought by the trade organization at the prices prevailing in foreign markets. Prices in trade with other member countries of the Council of Mutual Economic Assistance10 deviate from world market prices because of adjustments for differences in transportation costs, etc. They are probably also influenced by the comparative bargaining powers of the parties to a trade agreement.
The ruble exchange rate is of no interest to Soviet domestic producers (i.e., those who sell goods destined for export to exporting organizations), to final purchasers of imported goods, or to foreign exporters and importers. Transactions between foreign exporters and importers and Soviet specialized foreign trade organizations are settled in foreign currencies (or in some abstract unit of value), and transactions between Soviet foreign trade organizations and Soviet suppliers or purchasers of exported or imported goods in rubles. No explicit exchange rate is used.
In view of the method of price formation in the U.S.S.R. and of the fact that domestic prices are “shielded” from outside influences, any resemblance between the price patterns in the U.S.S.R. and in other countries could be nothing more than a sheer coincidence. Therefore, if a uniform exchange rate were applied to foreign trade transactions, carried out according to a plan constructed independently of domestic prices, some exporting and importing enterprises would make extra profits while others would suffer losses. The exchange rates actually involved are, therefore, only implicit and necessarily multiple, and, in the management of the Soviet economy, are of no significance. The exchange rate is, in fact, irrelevant in foreign trade transactions. It in no way serves as a guide in making foreign trade decisions. If it were to be used for this purpose, it would have to be a price, which the ruble exchange rate is not.
The only use of the official exchange rate in the U.S.S.R. is to convert foreign exchange reserves into rubles in order to make them an item formally comparable with other items in the balance sheet of the State Bank. But since the official exchange rate does not represent an average value of the ruble (as will be shown in the next section), the ruble values of foreign exchange obtained in this way cannot serve any planning purpose. It is doubtful whether even an exchange rate which conformed to the “A” price level could serve a planning purpose, because the distortion of prices would mean that any shift in the commodity composition of exports or imports would cause changes in the value of the ruble.
A comparison of foreign trade balances expressed in terms of a foreign currency and in rubles may provide a limited substitute for the guidance functions of the exchange rate. U.S.S.R. foreign trade may be balanced in terms of rubles and at the same time unbalanced in terms of foreign exchange, or vice versa. A comparison of these balances might reveal fiscal ruble losses or profits. Where accounts are unbalanced in terms both of foreign exchange and of rubles, a formula may be devised for calculating the fiscal results of foreign trade transactions.
If there are to be neither gains nor losses, the following condition must be fulfilled: IrId=ErEd; where “Ir,” “Er” are the ruble values of imports and exports, and “Id” and “Ed” the dollar values of imports and exports, respectively. This condition means that the average implicit exchange rate for imports is equal to that for exports. If it is not fulfilled, the difference between the actual ruble value of imports and the hypothetical dollar value which would give a zero fiscal profit, Ir-IdErEd, or a similar difference computed for exports, IrEdId-Er, shows the range in terms of rubles of the fiscal profits or losses. If exports and imports in terms of dollars are equal, both formulae reduce to Ir—Er.
Such calculations may be applied for the purpose of choosing the goods to be exported or imported. In order to eliminate or diminish fiscal losses, or to obtain fiscal profits, the commodity composition of exports and imports should be set so as to maximize the implicit exchange rate of the ruble. In fact, however, shifts in the commodity composition of Soviet foreign trade are determined by the requirements of Soviet economic plans for production and consumption, and appear not to be influenced by any consideration of this kind.
While the official exchange rate of the ruble is irrelevant in foreign trade transactions, it is relevant in transactions with foreigners who purchase consumers’ goods and services inside the U.S.S.R. at retail prices and pay in rubles. The scope of transactions in which the exchange rate is relevant might be widened or narrowed. For example, it might be made relevant in payments for transit charges, if these had to be made in rubles according to domestic tariffs, or its relevance might be limited by organizing special stores for diplomats, where payments were required in foreign exchange. It is, however, difficult to imagine any practical policy which would completely eliminate the relevancy of the exchange rate.
Since the official ruble exchange rate is irrelevant for foreign trade purposes, i.e., in transactions in goods of “A” price category, but is relevant in transactions in goods of “B” price category, it should be expected to conform to the “B” price level.
Significance of the Revaluation of the Ruble
Revaluation of the ruble
On February 28, the Council of Ministers of the U.S.S.R. announced the revaluation of the Soviet ruble and, as indicated above, a reduction of retail prices of important consumers’ goods, effective March 1, 1950. The value of the ruble used in accounts for foreign trade transactions was fixed at 0.222168 grams of fine gold, which corresponds to a price for fine gold of 4.5011 rubles per gram. The exchange rate of the ruble was accordingly changed from 5.30 to 4 rubles to the U.S. dollar, a revaluation of 32.5 per cent.11 The preferential diplomatic exchange rate was changed from 8 to 6 rubles to the U.S. dollar, a revaluation of one third. As of July 1, 1950, the preferential diplomatic rate was abolished.
By tying the ruble to gold, the Soviet Government discontinued the practice established in 1937 of calculating exchange rates in terms of other currencies on a dollar basis: “In the event of further changes in the gold content of foreign currencies or in their exchange rates, the State Bank of the U.S.S.R. shall alter the foreign exchange rate of the ruble correspondingly.”12
The revaluation of the ruble was justified, according to the official statement, by three reductions of prices of consumers’ goods in the U.S.S.R. since the monetary reform of 1947, and by the increase of prices in Western countries.13 This “resulted in … strengthening of the ruble, increasing its purchasing power, so that it is now 14 higher than its official exchange rate.”15
“Internationalization” of the ruble
Since under the present price and foreign trade system of the U.S.S.R. the exchange rate of the ruble has been irrelevant for foreign trade transaction purposes, the opinion of the Soviet Government that the rate should conform to relative price levels, and its decision to change the rate, may suggest that the Soviet Government intends to give the ruble some new important functions in its foreign trade.
The Soviet Union has ceased, since 1949, to observe strictly the long-established rule of expressing foreign trade agreements in terms of foreign exchange, mostly in U.S. dollars. The values of goods to be exchanged were expressed in rubles in a few of the agreements concluded in 1949 with Eastern European countries. Also, after the ruble revaluation of February 28, 1950, Poland published her 1949 foreign trade statistics in terms of the new ruble, instead of in U.S. dollars, as had previously been customary. This development may seem to indicate that the U.S.S.R. intends, in its trade transactions, to replace the U.S. dollar with the ruble, and to create a ruble bloc in Eastern Europe, possibly with a multilateral system of settlement.
If the ruble were to replace the U.S. dollar in Eastern European trade, it would have to fulfill the same functions that are now performed by the dollar. (This would be a necessary but not a sufficient condition for the ruble to become an international currency.) At present the U.S. dollar is used by member countries of the Council of Mutual Economic Assistance in quoting prices and values in international trade and for reserve purposes. In fulfilling the first function, however, it expresses approximately world market prices, and not the prices actually prevailing in the U.S.S.R. and in other Eastern European countries. The importance of the dollar as an element in monetary reserves is very limited: trade under bilateral agreements is usually balanced, and temporary export surpluses represent an accumulation of “clearing dollars,” which can be converted into goods only within specified commodity lists at negotiated prices. The dollar performs a reserve function in the full sense only for the final export surpluses which, according to some agreements, must be paid in U.S. dollars. But even in this case, this function is performed only because dollars are convertible into goods in countries outside Eastern Europe and are therefore acceptable by any Eastern European country.
For the ruble to fulfill the functions at present performed by the U.S. dollar, it must be made acceptable in payments for final trade surpluses, and indeed if trade within the Eastern European countries is to be multilateralized, it must be made acceptable for that purpose to a larger extent than is the U.S. dollar at present in that area. This requirement might be satisfied in two ways.
First, the prices used for foreign trade purposes might still be world market prices, while Eastern European countries would be supplied with the amounts of rubles convertible into U.S. dollars (or any other Western currency) needed to cover their import surpluses in trade with the West, which for all practical purposes would be equivalent to the convertibility of rubles into gold. This solution, although it probably would contribute to the multilateralization of trade, would not in fact replace the U.S. dollar with the Soviet currency. The ruble supplied to Eastern European countries by the U.S.S.R. would not be the ruble circulating in the Soviet Union. As long as the valuation of goods exchanged was based on world market prices, it would in fact be only the U.S. dollar or some other currency, to which the name of ruble would be given while it was being used in Eastern Europe. Such a solution may be called a nominal substitution of the ruble for the U.S. dollar.
Alternatively—and this is the only way by which the Soviet currency could actually be made a substitute for the U.S. dollar in its economic functions—the ruble might be made directly convertible (within the conditions of the trade agreements) into goods at the delivery prices prevailing in the U.S.S.R. and in other member countries of the Council of Mutual Economic Assistance. This would mean that the ruble exchange rate would become relevant in foreign trade transactions, and would perform the function of guidance normal to an exchange rate. If this condition were fulfilled, the ruble would cease to be a purely domestic currency and, under favorable technical conditions, might come to be used in international transactions, not only inside the U.S.S.R. but also by other countries.
The new exchange rate and the price level
The March 1950 revaluation of the Soviet currency could be regarded as a preliminary step toward internationalization of the ruble, only if the exchange rate of 4 rubles to the U.S. dollar then established were to correspond approximately to the “A” price level in the U.S.S.R. Such an exchange rate would facilitate the changes in price patterns which are necessary if the exchange rate of the ruble is to perform guidance functions and become a relevant factor in international trade.
The lack of data on wholesale prices in the U.S.S.R. does not permit any precise estimate of the ruble exchange rate which would conform to the “A” price level in the U.S.S.R. and to general price levels in Western countries. On the basis of limited data on the prices of consumers’ goods, the exchange rate which corresponds to the purchasing power of the ruble, measured in terms of prices of “B” goods, may, however, be roughly estimated at about 25 rubles to the U.S. dollar. The value of the ruble measured by reference to the cost of living is greater because of the importance in the U.S.S.R. of relatively inexpensive services, e.g., rents, and may be estimated at about 20 rubles to the U.S. dollar. If the relative price spread in the U.S.S.R. amounts to 60 per cent, the average exchange rate based on “A” prices, calculated on the basis of the simplified formula, would be around 10 rubles to the U.S. dollar, with the rate appropriate for capital goods perhaps somewhat higher. On this hypothesis, the ruble seems, at the present exchange rate of 4 to the dollar, to be overvalued by about 150 per cent. If the price spread in the U.S.S.R. is assumed to have been estimated with sufficient accuracy, the present exchange rate is thus too high to represent even approximately the relation between average domestic Soviet prices of “A” goods and wholesale prices in Western countries.
It might be argued that the present ruble exchange rate has been established because it corresponds to the prices and exchange rates of the members of the Council of Mutual Economic Assistance, which account for about two thirds of the total “commercial” foreign trade16 of the U.S.S.R. If this were so, the currencies of the Eastern European countries, in relation to Western currencies, would also be overvalued by about as much as the ruble.
The exchange rates of at least three countries, Czechoslovakia, Hungary, and Poland, which account for the greater part of Eastern European trade with the U.S.S.R., probably correspond approximately to their “B” price levels, and in any case are not overvalued by 150 per cent. To ascertain how far the present ruble exchange rate corresponds to Eastern European prices and exchange rates, however, rates corresponding to “A” price levels should be compared. Since such exchange rates do not exist in these countries, the Soviet Government cannot have been motivated in its decision to revalue the ruble by a desire to adjust it to Eastern European exchange rates.
It may be concluded that, at the present exchange rate, the ruble is seriously overvalued in comparison with any currency of importance to the U.S.S.R., and that it does not represent even approximately the “A” price level purchasing power parity.
Conditions for relevance of the exchange rate
Even if the present ruble exchange rate corresponded approximately to the relation between “A” price levels in the U.S.S.R. and in Eastern European countries and wholesale price levels in Western countries, this would not be a sufficient condition for the internationalization of the ruble. A further condition would also have to be fulfilled: national exchange rates would have to be made relevant in international trade transactions. Only then, under favorable technical circumstances and arrangements, might the ruble become an international currency. This condition has not so far been fulfilled in the U.S.S.R. or in the Eastern European countries which are members of the Council of Mutual Economic Assistance.
If internationalization of the ruble is to be achieved on a world scale, Soviet domestic prices in foreign trade transactions would have to be adjusted to Western price patterns, in order to make them relevant for foreign trade transactions. Western price patterns could be influenced only insignificantly by the U.S.S.R., through changes in the volume or the commodity composition of its trade. The changes which would be necessary in Soviet domestic price patterns, and possibly also in its taxation system17 would, however, be far-reaching. That this would be the aim of the Soviet Government is improbable. It would involve radical changes in economic planning, and for that matter in the whole economic system of the U.S.S.R., and is in any event impossible on ideological grounds. The Soviet economic system and its technical methods of economic management are considered by the Soviet authorities to be superior to any other, and the conviction that the acceptance of external influences would impair the purity of socialist principles, as interpreted by the Communist Party, is deeply rooted in Soviet minds.
It might be argued, however, that internationalization of the ruble may be feasible if limited to the U.S.S.R. and other members of the Council of Mutual Economic Assistance (possibly including Eastern Germany and China). This, it might be maintained, is possible, since Eastern European prices could be adjusted to Soviet patterns by governmental administrative action. An Eastern European clearing union could then be created and a certain degree of multilateralization achieved.
Such a unification, however, would require the members of the Eastern European Clearing Union to have two different standards of value for foreign trade: one for partners in the Union and the other for the outside world. The first would be based on Union price patterns, the latter on the U.S. dollar and other Western currencies. It is doubtful whether such a system would represent any simplification, compared with the present one.
In any event, such unification would not be consistent with the present economic doctrine and management of the U.S.S.R. The system of pricing (as distinct from the price pattern which results from the pricing system) applied in the U.S.S.R. is regarded there as the ultimate perfection of economic calculus and is gradually being accepted by other Eastern European countries. Because of differences in basic economic facts, the price patterns which will emerge in Eastern European countries after the Soviet pricing methods have been introduced could, however, be similar to those in the U.S.S.R. only by accident. There are significant differences in the patterns of prices of labor. Therefore, if goods moving in intra-Eastern European trade were to be priced according to the Soviet price pattern, this could not be done by a thoroughgoing application of the Soviet pricing methods in other Eastern European countries. Either the Soviet price pattern or the Soviet pricing methods may be accepted by Eastern European countries. Both cannot be maintained at the same time. The fact that the Eastern European members of the Council of Mutual Economic Assistance are introducing the Soviet pricing methods seems to rule out the possibility, at least for the time being, of a unification of prices.
Therefore, of all the characteristics of an international currency, only the purely technical condition that the ruble shall be related to national currencies through exchange rates can be and is fulfilled. This in itself, without fulfillment of the condition that exchange rates shall be relevant, gives the ruble only the appearance of an international standard of value, and may satisfy only the requirements of prestige. Prices in trade agreements may be expressed in rubles, but these prices will either be agreed arbitrarily or will represent only translations from the prices of Western capitalist countries.
Since it can hardly be expected that the Soviet pricing methods will be changed in the foreseeable future, any spectacular moves of the U.S.S.R. affecting foreign trade and exchange, similar to the latest revaluation of the ruble, would at most mean only an approach to the nominal substitution of the ruble for the U.S. dollar. There is no doubt that the Soviet Union is gradually consolidating the economies of Eastern European members of the Council of Mutual Economic Assistance, and that foreign trade is one of the main instruments of this policy. But it seems evident that this will involve only a consolidation of planning, the pooling of commodities and specialization of production, and that currency considerations will play no active part in it.
Diplomatic exchange rate
Since under the present price patterns in the U.S.S.R. the exchange rate of the ruble must continue to be irrelevant, an improvement in the terms of trade of the U.S.S.R. in relation to Eastern European countries could not have been the aim of the revaluation of the ruble. The terms of trade were, however, improved in relation to all countries by the revaluation of the diplomatic exchange rate. The Soviet Government does not intend to increase its foreign exchange proceeds from tourists, diplomats, etc., and, therefore, could afford to revalue the diplomatic ruble, although it was already greatly overvalued. It is possible, however, that the demand for rubles at the diplomatic exchange rate is already so inelastic that this revaluation will in fact slightly increase total foreign exchange proceeds. At the same time, the revaluation of the ruble may decrease the expenditures of Soviet representatives in Eastern European countries and in Eastern Germany, and reduce the costs of all services bought by them in these countries, which are not covered by clearing trade agreements.
June 1950
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https://globalfinancialdata.com/armenia
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Global Financial Data
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"Odin Mayland"
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0001-11-29T16:07:02-07:52
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We are a Global Data provider: For over 25 years Global Financial Data has been providing alternative historical economic and financial data.
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en
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/templates/shaper_helixultimate/images/favicon.ico
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https://globalfinancialdata.com/armenia
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Armenia was part of the Russian Empire when the Russian civil war broke out. Armenia was part of the short-lived Transcaucasian Republic from September 20, 1917 to May 26, 1918. Armenia remained independent until November 12, 1920 when Soviet forces formed the Armenian Socialist Soviet Republic. On March 12, 1922 it became part of the Federative Union of Soviet Socialist Republics of Transcaucasia, which became a founding component of the Soviet Union on December 30, 1922. It was part of the Transcaucasia SSR until December 5, 1936 when the Armenia SSR was established. Armenia declared its independence from the Soviet Union on September 23, 1991.
Russian Rubles (RUEP) were used in Armenia until 1918. The Transcaucasian Republic (ZKVR), the Armenian Republic (AMR), the Federation of Socialist Soviet Republics of Transcaucasia (ZKSR) and the Transcaucasia SFSR (ZKSR) each issued their own banknotes (but not coins), all in the form of rubles. Each of these currencies was independent of the Russian Federation Ruble. Transcaucasia suffered the highest inflation of any SSR, issuing a 1,000,000,000 Ruble note in 1924. In each case, the Ruble was divisible into 100 Kopeks. The Transcaucasian Commissariat issued the Transcaucasian Republic Rubles, the Government Bank at Yerevan issued the Armenian Ruble, the Armenian Socialist Soviet Republic issued the Armenian Soviet Ruble, and the Transcaucasian Socialist Federal Soviet Republic issued the Transcaucasian SFSR Ruble.
After 1924, Soviet rubles were used. The Chervonetz (SUC) was introduced on December 27, 1922, which was backed 25% by gold, and eventually replaced the Ruble Sovnazki as a unit of account. The Gold Ruble (SUG) was introduced on March 7, 1924 equal to 1/10 Chervonetz. A New Ruble (SUN) replaced the Gold Ruble on December 29, 1947 at the rate of 1 New Ruble equal to 10 Gold Rubles. On January 1, 1961, the Hard Ruble (SUR) replaced the New Ruble at the rate of 1 Hard Ruble equal to 10 New Rubles. Under the Soviet Union, the State Treasury and by the State Bank (Gosbank) issued banknotes.
After gaining its independence on December 25, 1991, Armenia continued to use the Russian Ruble (RUR). The Russian Ruble was replaced with the Armenian Dram (AMD) on November 22, 1993 at the rate of 1 Dram equals 200 Russian Rubles. The Dram is divisible into 100 Luma. Banknotes were issued by the Armenian Republic Bank beginning in 1993 until 1998, and by the Central Bank of the Republic of Armenia beginning in 1998.
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Soviet Ruble (Colder War by Yuaka)
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https://static.wikia.nocookie.net/althistory/images/3/39/Site-community-image/revision/latest?cb=20220509015010
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the Ruble (Russian: рубль), also the Soviet Ruble (Russian: советский рубль), is the official currency in the Soviet Union, it is divided into 100 kopecks. Recently, in 2013, 3 kopek, 3, 5, and 10 ruble coins and a 200 ruble note have ceased to be used. And banknotes with a denomination of 3...
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en
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https://static.wikia.nocookie.net/althistory/images/4/4a/Site-favicon.ico/revision/latest?cb=20210916203836
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Alternative History
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https://althistory.fandom.com/wiki/Soviet_Ruble_(Colder_War_by_Yuaka)
|
Value Material Weight Diameter Obverse Reverse Edge Circulation 1 Kopeck Brass-plated steel 1.6 g (0.06 oz) 15.5 mm (0.61 in) State Emblem of the Soviet Union with the year of mintage "1 Kopek" and a stalk of wheat Smooth High 2 Kopecks Brass-plated steel 2.8 g (0.10 oz) 18.5 mm (0.73 in) State Emblem of the Soviet Union with the year of mintage "2 Kopeks" and a stalk of wheat Smooth High 5 Kopecks Brass-plated steel 3.6 g (0.13 oz) 21.0 mm (0.83 in) State Emblem of the Soviet Union with the year of mintage "5 Kopeks" and a stalk of wheat Smooth High 10 Kopecks Brass 2.75 g (0.10 oz) 17.5 mm (0.69 in) State Emblem of the Soviet Union with the year of mintage "10 Kopeks" and a stalk of wheat Ribbed High 20 Kopecks Brass 3.5 g (0.124 oz) 19.5 mm (0.77 in) State Emblem of the Soviet Union with the year of mintage "20 Kopeks" and a stalk of wheat Ribbed High 50 Kopecks Brass 8.6 g (0.30 oz) 23.5 mm (0.93 in) State Emblem of the Soviet Union with the year of mintage "50 Kopeks" and a stalk of wheat Ribbed High
1 Ruble
Copper-nickel 15.5 g (0.55 oz) 33 mm (1.30 in) The obverse side of the coin features the portrait of Vladimir Lenin, facing left. The year of issue is located at the bottom, and the text "CCCP" is inscribed in Cyrillic letters above the portrait. The reverse side of the coin features an image of the Spasskaya Tower of the Moscow Kremlin, with the text "ОДИН РУБЛЬ" ("One Ruble") inscribed above it. The mint mark and the date of issue are located at the bottom.
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Russian Ruble (RUB): Overview of Russia's Currency
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2008-06-30T13:00:00-04:00
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The Russian ruble (RUB) is the currency of Russia and is the second-oldest currency still in circulation, behind the British pound sterling. The Russian ruble is made up of 100 kopeks.
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en
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/favicon.ico
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Investopedia
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https://www.investopedia.com/terms/forex/r/rub-russian-ruble.asp
|
What Is the Russian Ruble (RUB)?
The Russian ruble (sometimes spelled rouble) is the national currency of the Russian Federation. The ruble is the second-oldest currency still in circulation, behind the British pound. It is made up of 100 kopeks.
Understanding the Russian Ruble (RUB)
The ruble (RUB) has been used since the 13th century and has been through a number of incarnations during that time, including multiple revaluations and devaluations. The most recent changes occurred before the fall of the Soviet Union in 1992 and during the redenomination in 1998. The 1998 redenomination made one new ruble worth 1000 old rubles.
In recent years, the currency's exchange rate has generally tracked global commodity prices, especially oil prices, because Russia's economy heavily depends on exports of oil, natural gas, and other natural resources. The ruble collapsed in the second half of 2014, losing about half its value versus the U.S. dollar as global oil prices plunged. Economic and financial sanctions imposed by the U.S. and European Union on Russia in July 2014 over its invasion and annexation of Crimea also helped weaken it.
The Ruble and Geopolitics
The ruble’s exchange rate is not only affected by economic factors, but also by geopolitical events and tensions involving Russia and its neighbors. In recent years, the ruble has experienced significant volatility and depreciation due to several crises and conflicts that have strained Russia’s relations with the West and other countries.
One notable event was the annexation of Crimea by Russia in 2014, which triggered international sanctions and condemnation from the United States, the European Union, and other countries. The sanctions targeted key sectors of the Russian economy, such as energy, finance, defense, and trade, and restricted access to foreign capital and technology. The ruble plunged to record lows against the dollar and the euro in late 2014 and early 2015, as investors fled Russian assets amid uncertainty and risk. Prior to this event, the USD/RUB exchange rate was around 30 rubles to the dollar; following the invasion it rose to 50-60 rubles to dollars, where it remained for several years.
Following Russia’s large-scale invasion of Ukraine in February 2022, the U.S., the EU, and other nations imposed another round of even stricter sanctions on Russia’s largest financial institutions and enterprises, including Russia’s central bank and energy giant Gazprom. At the same time, many Western corporations suspended or ceased doing business inside of Russia. These measures sent the value of the ruble plummeting to record lows against foreign currency, and briefly touching nearly 135 rubles to the dollar.
As the Russia-Ukraine conflict has raged, the ruble settled into a trading range of around 70 to 80 RUB per USD; however, it remains volatile. For instance, in June of 2023, when the private military contractor Wagner Group mutinied and briefly marched toward Moscow, the ruble sank to 87 to the dollar — its weakest level since the early days of Russia's invasion of Ukraine — as it revealed internal political tensions and fragility for Putin's regime.
Russia's Economy
Russia is more than twice as large as the contiguous 48 U.S. states and is blessed with enormous natural resources. Yet Russia’s annual gross domestic product (GDP) ranked only 11th worldwide in 2021, is only 7.72% the size of the U.S. economy. That's because Russia relies heavily on exports of natural resources, rather than higher-value-added industries. In fact, in terms of GDP, Russia trails much smaller countries, such as Italy and France.
Ongoing political tensions have hurt the Russian economy, as the country has repeatedly faced sanctions from the international community. The value of the ruble along with many Russian companies plummeted after Russia began its invasion of Ukraine in February 2022.
The Digital Ruble
President Vladimir Putin announced in 2017 that the Bank of Russia would issue a Central Bank Digital Currency (CDBC). Though many countries are now exploring CBDCs, Russia was one of the earliest countries to do so. In December 2021, a prototype of the digital ruble was completed and the first transfers using the digital ruble's platform were successful. The Bank of Russia announced that 12 Russian banks were ready to begin using the digital ruble.
In February 2022, many commentators suggested Russia could evade international sanctions using cryptocurrency. Though a CBDC is much different from a private cryptocurrency, a digital ruble could limit Russia's dependence on using foreign currencies, such as the U.S. dollar.
The Bottom Line
The Russian Ruble (RUB), among the oldest currencies still in circulation, is heavily influenced by global oil prices, considering Russia's key role as an exporter of oil and natural gas. The Ruble has witnessed multiple transformations since its inception in the 13th century, with the latest changes occurring due to the fall of the Soviet Union in 1992 and the redenomination in 1998. Geopolitical events, particularly Russia's conflicts with Ukraine and the sanctions imposed from various nations, have played substantial roles in devaluing the Ruble's exchange rate. Despite the tumultuous economic climate, Russia has pioneered in the digital currency space with the introduction of a Central Bank Digital Currency. The Bank of Russia maintains control over the Ruble's value through various monetary policy tools.
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Russia’s ruble has tumbled. What does it mean for the wartime economy?
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[
"DAVID McHUGH"
] |
2023-08-15T13:12:53+00:00
|
The Russian ruble has fallen a long way in recent months, and the country's central bank is stepping in to halt the slide.
|
en
|
/apple-touch-icon.png
|
AP News
|
https://apnews.com/article/why-is-ruble-falling-ee777eeaf897d42befae052336fc35d5
|
Russia’s ruble has fallen a long way in recent months, and the country’s central bank has stepped in to try to halt the slide.
Until now, the government stood aside as the declining ruble helped its budget. But a weaker currency also poses the threat of higher prices for everyday people in Russia — and the government has finally moved to halt the drop.
Here are key things to know:
WHY IS THE RUBLE FALLING?
Russia is selling less abroad — mainly reflected in falling revenue from oil and natural gas — and it’s importing more. People or companies importing goods to Russia means selling rubles for foreign currency like dollars or euros. That lowers the ruble’s exchange rate.
Russia’s trade surplus — meaning it sells more goods than it buys — has shrunk. Previously, Russia saw a large trade surplus — which typically supports a country’s currency — because of high oil prices and plummeting imports after invading Ukraine.
But oil prices have dipped this year, and it’s more cumbersome for Russia to sell its oil due to Western sanctions, including price caps on crude and oil products like diesel.
Meanwhile, imports have started to recover after nearly a year and a half of war as Russians find ways around sanctions. Some trade has been rerouted to Asian countries that are not participating in sanctions. And importers have found ways to ship goods through nearby countries such as Armenia, Georgia and Kazakhstan.
At the same time, Russia has ramped up defense spending, pumping money into companies that make weapons, for instance. Companies must import parts and raw materials, while some government money winds up in the pockets of workers who buy imported goods.
That government spending, along with the willingness of India and China to buy Russia oil, is helping the economy perform better than many had expected. The International Monetary Fund said last month that it expects Russia’s economy to grow 1.5% this year.
WHY DID THE CENTRAL BANK RAISE INTEREST RATES?
To fight inflation, first of all.
A weaker ruble worsens inflation by making imports more expensive in Russian currency. And the ruble’s weakness is increasingly being passed through to prices people pay. Inflation hit 7.6% over the past three months.
Higher interest rates will make it more expensive to get credit, and that should limit domestic demand for goods — including imports. So the central bank is trying to cool off the domestic economy to lower inflation.
It raised its key interest rate from 8.5% to 12% at an emergency meeting Tuesday after the ruble’s fall was criticized by a Kremlin economic adviser.
DOES THIS MEAN SANCTIONS ARE WORKING?
Sanctions are having an impact even if they are not collapsing the economy. Exports — and thus the ruble — have fallen because Western allies have boycotted Russian oil and imposed a price cap on oil exports to non-Western nations. The sanctions prevent insurers or shippers who are mainly based in the West from handling Russian oil above $60 a barrel.
The cap and boycott have forced Russia to sell at a discount and take expensive steps such as obtaining a fleet of ghost tankers that are beyond the reach of sanctions.
However, higher oil prices have recently sent the cost of Moscow’s supplies above the price cap, the International Energy Agency said in an August report.
Oil revenue fell 23% in the first half of this year but Russia still earned $425 million a day from oil sales, according to the Kyiv School of Economics.
The rebound in imports shows that Russia is finding ways around sanctions and boycotts. It’s expensive and cumbersome, but if someone needs an iPhone or a Western-made car, they can get it.
IS RUSSIA HAVING AN ECONOMIC CRISIS?
No, says Chris Weafer, CEO of Macro-Advisory Ltd. “The lower ruble is partly a reflection of the effect of sanctions, but it doesn’t indicate an underlying economic crisis.”
The falling ruble actually has helped the government with its budget. It means more rubles for every dollar of earnings from oil and other products Russia sells. That bolsters spending on the military and on social programs aimed at blunting the impact of sanctions on the Russian people.
“They’ve tried to compensate for the drop in the dollar value of oil receipts with the weaker ruble, so that therefore the deficit in terms of spending could be contained and more manageable,” Weafer said.
Amid sanctions and restrictions on moving money out of the country, the ruble exchange rate is largely in the hands of the central bank, Weafer said. It can tell major exporters when to exchange their dollar earnings into Russian currency.
“The weakness was planned, but it’s overdone and they want to pull it back,” Weafer said.
Janis Kluge, a Russian economy expert at the German Institute for International and Security Affairs, said the ruble decline is “not very welcome” to the Kremlin.
While not a full-blown crisis, “this is the closest we came to a real economic problem since the start of the war,” Kluge said.
The chaos at the start of sanctions was far worse, but since then, the ruble decline “is the first time that something seems to be not so much under control,” he said.
Any boost to the budget from a lower ruble, he said, is offset by higher spending on government wages and pensions, which are indexed to the inflation caused by the lower ruble.
“Whatever gives the impression of a weak or unstable economy is not welcomed by the Russian government,” he said. “In Russia, the exchange rate is always seen as the most important indicator of the health of the economy.”
WHAT DOES THIS MEAN FOR RUSSIANS?
Inflation caused by ruble devaluation hits low-income people hard because they spend more on necessities like food.
While higher interest rates will dampen economic growth, relieving some pressure on prices, the government is unlikely to back off on military spending.
“So it’s a clear prioritization of the government of this war over the welfare of households,” Kluge said.
Foreign travel — enjoyed mostly by a minority in big cities like Moscow and St. Petersburg — gets much more expensive with a weaker ruble.
“The instability of the national currency always has a not so good impact,” said Dina Solovyova, 51, a veterinarian. “Most likely, this will affect ordinary people, because the rise in prices for everything will surely follow. We’ll wait and see.”
Nikolay Rubtsov, a 20-year-old student, indicated he wasn’t much disturbed by the ruble’s fall.
“This is all temporary. I think everything will be back to normal soon. I don’t think it can last long,” Rubtsov said in Moscow.
___
This story was first published Aug. 15, 2023. It was updated on Aug. 31, 2023, to correct the name of Chris Weafer’s firm. It is Macro-Advisory Ltd, not Macro Advisory Partners.
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https://apnews.com/article/why-is-ruble-falling-ee777eeaf897d42befae052336fc35d5
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Russia’s ruble has tumbled. What does it mean for the wartime economy?
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[
"DAVID McHUGH"
] |
2023-08-15T13:12:53+00:00
|
The Russian ruble has fallen a long way in recent months, and the country's central bank is stepping in to halt the slide.
|
en
|
/apple-touch-icon.png
|
AP News
|
https://apnews.com/article/why-is-ruble-falling-ee777eeaf897d42befae052336fc35d5
|
Russia’s ruble has fallen a long way in recent months, and the country’s central bank has stepped in to try to halt the slide.
Until now, the government stood aside as the declining ruble helped its budget. But a weaker currency also poses the threat of higher prices for everyday people in Russia — and the government has finally moved to halt the drop.
Here are key things to know:
WHY IS THE RUBLE FALLING?
Russia is selling less abroad — mainly reflected in falling revenue from oil and natural gas — and it’s importing more. People or companies importing goods to Russia means selling rubles for foreign currency like dollars or euros. That lowers the ruble’s exchange rate.
Russia’s trade surplus — meaning it sells more goods than it buys — has shrunk. Previously, Russia saw a large trade surplus — which typically supports a country’s currency — because of high oil prices and plummeting imports after invading Ukraine.
But oil prices have dipped this year, and it’s more cumbersome for Russia to sell its oil due to Western sanctions, including price caps on crude and oil products like diesel.
Meanwhile, imports have started to recover after nearly a year and a half of war as Russians find ways around sanctions. Some trade has been rerouted to Asian countries that are not participating in sanctions. And importers have found ways to ship goods through nearby countries such as Armenia, Georgia and Kazakhstan.
At the same time, Russia has ramped up defense spending, pumping money into companies that make weapons, for instance. Companies must import parts and raw materials, while some government money winds up in the pockets of workers who buy imported goods.
That government spending, along with the willingness of India and China to buy Russia oil, is helping the economy perform better than many had expected. The International Monetary Fund said last month that it expects Russia’s economy to grow 1.5% this year.
WHY DID THE CENTRAL BANK RAISE INTEREST RATES?
To fight inflation, first of all.
A weaker ruble worsens inflation by making imports more expensive in Russian currency. And the ruble’s weakness is increasingly being passed through to prices people pay. Inflation hit 7.6% over the past three months.
Higher interest rates will make it more expensive to get credit, and that should limit domestic demand for goods — including imports. So the central bank is trying to cool off the domestic economy to lower inflation.
It raised its key interest rate from 8.5% to 12% at an emergency meeting Tuesday after the ruble’s fall was criticized by a Kremlin economic adviser.
DOES THIS MEAN SANCTIONS ARE WORKING?
Sanctions are having an impact even if they are not collapsing the economy. Exports — and thus the ruble — have fallen because Western allies have boycotted Russian oil and imposed a price cap on oil exports to non-Western nations. The sanctions prevent insurers or shippers who are mainly based in the West from handling Russian oil above $60 a barrel.
The cap and boycott have forced Russia to sell at a discount and take expensive steps such as obtaining a fleet of ghost tankers that are beyond the reach of sanctions.
However, higher oil prices have recently sent the cost of Moscow’s supplies above the price cap, the International Energy Agency said in an August report.
Oil revenue fell 23% in the first half of this year but Russia still earned $425 million a day from oil sales, according to the Kyiv School of Economics.
The rebound in imports shows that Russia is finding ways around sanctions and boycotts. It’s expensive and cumbersome, but if someone needs an iPhone or a Western-made car, they can get it.
IS RUSSIA HAVING AN ECONOMIC CRISIS?
No, says Chris Weafer, CEO of Macro-Advisory Ltd. “The lower ruble is partly a reflection of the effect of sanctions, but it doesn’t indicate an underlying economic crisis.”
The falling ruble actually has helped the government with its budget. It means more rubles for every dollar of earnings from oil and other products Russia sells. That bolsters spending on the military and on social programs aimed at blunting the impact of sanctions on the Russian people.
“They’ve tried to compensate for the drop in the dollar value of oil receipts with the weaker ruble, so that therefore the deficit in terms of spending could be contained and more manageable,” Weafer said.
Amid sanctions and restrictions on moving money out of the country, the ruble exchange rate is largely in the hands of the central bank, Weafer said. It can tell major exporters when to exchange their dollar earnings into Russian currency.
“The weakness was planned, but it’s overdone and they want to pull it back,” Weafer said.
Janis Kluge, a Russian economy expert at the German Institute for International and Security Affairs, said the ruble decline is “not very welcome” to the Kremlin.
While not a full-blown crisis, “this is the closest we came to a real economic problem since the start of the war,” Kluge said.
The chaos at the start of sanctions was far worse, but since then, the ruble decline “is the first time that something seems to be not so much under control,” he said.
Any boost to the budget from a lower ruble, he said, is offset by higher spending on government wages and pensions, which are indexed to the inflation caused by the lower ruble.
“Whatever gives the impression of a weak or unstable economy is not welcomed by the Russian government,” he said. “In Russia, the exchange rate is always seen as the most important indicator of the health of the economy.”
WHAT DOES THIS MEAN FOR RUSSIANS?
Inflation caused by ruble devaluation hits low-income people hard because they spend more on necessities like food.
While higher interest rates will dampen economic growth, relieving some pressure on prices, the government is unlikely to back off on military spending.
“So it’s a clear prioritization of the government of this war over the welfare of households,” Kluge said.
Foreign travel — enjoyed mostly by a minority in big cities like Moscow and St. Petersburg — gets much more expensive with a weaker ruble.
“The instability of the national currency always has a not so good impact,” said Dina Solovyova, 51, a veterinarian. “Most likely, this will affect ordinary people, because the rise in prices for everything will surely follow. We’ll wait and see.”
Nikolay Rubtsov, a 20-year-old student, indicated he wasn’t much disturbed by the ruble’s fall.
“This is all temporary. I think everything will be back to normal soon. I don’t think it can last long,” Rubtsov said in Moscow.
___
This story was first published Aug. 15, 2023. It was updated on Aug. 31, 2023, to correct the name of Chris Weafer’s firm. It is Macro-Advisory Ltd, not Macro Advisory Partners.
|
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9245
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https://www.voanews.com/a/6464195.html
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Coordinated Sanctions Batter Russia's Economy as Ruble Loses Value
|
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] |
[] |
[] |
[
"Ukraine",
"Ukraine",
"sanctions",
"russia central bank"
] | null |
[
"Rob Garver"
] |
2022-03-01T11:29:27+00:00
|
Measures taken to freeze the Russian central bank's foreign currency reserves leave Moscow unable to protect its domestic currency
|
en
|
/Content/responsive/VOA/img/webApp/favicon.svg
|
Voice of America
|
https://www.voanews.com/a/6464195.html
|
The United States and other Western countries took extraordinary steps to cut Russia off from the global financial system over its invasion of Ukraine, blocking its ability to prevent a major devaluation of the ruble on foreign exchange markets, and severely limiting the ability of its banks to make international transactions.
On Monday morning, the U.S. Treasury officially announced that it had barred U.S. companies from doing business with the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation. That includes banks that hold assets belonging to any of those entities.
"The unprecedented action we are taking today will significantly limit Russia's ability to use assets to finance its destabilizing activities, and target the funds Putin and his inner circle depend on to enable his invasion of Ukraine," Secretary of the Treasury Janet L. Yellen said in a statement. "Today, in coordination with partners and allies, we are following through on key commitments to restrict Russia's access to these valuable resources."
At the same time, governments around the world, including the member states of the European Union, the United Kingdom, Japan, Singapore, Australia and others announced similar restrictions.
Those actions came on top of an international agreement to cut off some Russian banks from the SWIFT network, which banks use to facilitate international transactions. Run by the Society for Worldwide Interbank Financial Telecommunication, the SWIFT network is essential to the smooth operation of the global banking system.
Central bank sanctions
Among other things, the sanctions announced Monday block the Russian Central Bank's access to large portions of its $630 billion in foreign currency reserves.
One of the main reasons central banks hold foreign currency reserves is to allow them to protect their own currencies from sudden price changes.
"Fundamentally, the fact that the central bank has that foreign currency allows the central bank to intervene in a way that prevents a disorderly depreciation of the currency," Gian Maria Milesi-Ferretti, a senior fellow at the Brookings Institution's Hutchins Center on Fiscal and Monetary Policy, told VOA.
A major step
Milesi-Ferretti said that the decision to freeze funds belonging to Russia's central bank is practically unprecedented when it comes to a major economy.
"The only precedent I'm aware of is Iran, which had, of course, a much different level of integration with financial markets than Russia does," he told VOA.
Iran's central bank assets in the U.S. were frozen in 1979 by U.S. President Jimmy Carter after Islamic revolutionaries in that country unseated Mohammad Reza Shah Pahlavi and took American embassy personnel hostage.
The impact of the Russia freeze was immediately apparent Monday.
When markets lose confidence in the value of a currency, it costs more to exchange that currency for other currencies on the open market. For example, last week, it was possible to buy one U.S. dollar for about 80 Russian rubles. On Monday, as people and companies rushed to exchange their rubles for dollars, the price of one dollar rose to nearly 118 rubles.
The Russian central bank's foreign currency reserves could have allowed it to take some of the pressure off the ruble by using those funds to purchase rubles on the open market.
Disruptions in Russia
Reports out of Russia on Monday indicated that there was a rush among some consumers to trade their rubles for other currencies, in order to protect savings from sudden devaluation. However, there were also reports of foreign currency shortages.
In addition, other reports suggested that the commonly used mobile payment systems Apple Pay and Google Pay had ceased functioning for some users over the past several days. The outage appears to be the result of individual Russian banks being targeted by sanctions, which made it illegal for U.S. firms, such as Apple and Google, to do business with them.
Major international corporations Monday announced that they were divesting from partnerships with Russian firms. British Petroleum announced that it would abandon its 20% stake in the state-owned energy firm Rosneft. Other major firms, including the oil firm Shell and the banking firm HSBC, also announced that they were severing financial ties with Russian partners.
The havoc led Russian regulators to close the country's stock and derivatives markets Monday.
SWIFT impact
Cutting off Russian banks from SWIFT has been called the "nuclear option" of financial sanctions, but it does not make it impossible for the Russian banks to transact with other banks in the world. What it does is make the process far less efficient.
SWIFT is a messaging service that lets banks quickly and securely verify the identity of the banks and individuals involved in an international transaction. However, there is nothing to prevent Russian banks from using other means of communications.
Nicolas Véron, senior fellow at Peterson Institute for International Economics, also a senior fellow at Bruegel, a Brussels-based economic policy think tank, told VOA that limiting SWIFT access – especially when applied to only some Russian banks, is not the death blow that many believe it to be.
"I think this metaphor of the nuclear option is a bit unfortunate because it doesn't kill anybody," he said. "It makes life more complicated for Russian banks, but it doesn't actually prevent transactions [from being] executed and completed. It just makes everything more complicated because SWIFT is very convenient when you have it."
Mandarin Service reporter Yinan Wang contributed to this story.
|
||||
9245
|
dbpedia
|
2
| 18
|
https://corporatefinanceinstitute.com/resources/foreign-exchange/russian-ruble-rub/
|
en
|
Russian Ruble (RUB)
|
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[] |
[] |
[
""
] | null |
[
"CFI Team"
] |
2023-10-13T13:46:20+00:00
|
The Russian Ruble refers to Russia’s currency. Coming into use in the 14th century, the ruble is the second oldest currency after the Sterling
|
en
|
//cdn.corporatefinanceinstitute.com/assets/cfi-favicon-3-150x150.png
|
Corporate Finance Institute
|
https://corporatefinanceinstitute.com/resources/foreign-exchange/russian-ruble-rub/
|
What is the Russian Ruble (RUB)?
The Russian Ruble refers to Russia’s currency. Coming into use in the 14th century, the ruble is the second oldest currency after the Sterling Pound. In 1704, it became the first European currency to be decimalized, when the ruble was equivalent to 100 kopeks.
Russian ruble notes are printed in Moscow’s state-owned factory, which began its operations at the end of World War I. Coins are minted in both Moscow and the almost 300-year-old St. Petersburg Mint. While there is no official symbol, py6 (three Cyrillic characters equal to RUB in Russian) is currently used to represent the Russian ruble.
History of the Russian Ruble
The history of the ruble dates back to 1704, when the coin was standardized to 28 grams of silver during the rule of Peter the Great. A new standard was implemented on December 17, 1885, which did not affect the silver ruble but lowered the gold content to 1161 grams. Later, during the rule of Nicholas I, the silver ruble was declared a monetary unit and a principal instrument of payment, and banknotes became a payment support instrument.
Although the ruble went through innovations, reforms, and trials, the value remained intact until 1971. The design of the Russian currency changed in 1991 during the Soviet Union’s dissolution. The Central Bank of the Soviet Union placed into circulation new notes and coins. The Bank of Russia also issued Russian ruble banknotes in denominations 5,000 and 10,000. There was a new reform in 1993, which along with the new notes issued, aimed to bring an end to the circulation of Soviet versions.
Current Russian Ruble
A new 10-ruble coin made of brass-plated steel, incorporating optical security features, was issued in October 2009. The 10-ruble banknote would’ve been discontinued in 2012, but a lack of 10-ruble coins forced the central bank to pause this and bring new coins into circulation. Bimetallic commemorative coins of 10 rubles will continue to be issued.
A collection of circulated Olympic memorial coins of 25 rubles made of cupronickel began in 2011. Many small special edition coin denominations remain in circulation, representing national historic occasions and anniversaries.
In 2017, the Central Bank of Russia launched two new banknotes – 200 RUB and 2,000 RUB. A vote was held in September 2016 to determine the icons and cities to be shown on the new notes. Russian Internet users selected the symbols through an online poll conducted by the Bank of Russia. The Russian Central Bank unveiled the new icons in February 2017.
Russian Ruble and International Trade
On November 23, 2010, Russian President Vladimir Putin and the then-Prime Minister of China, Wen Jiabao, declared that Russia and China would use their currencies instead of USD for bilateral trade. The goal was to further strengthen relations between Moscow and Beijing and secure their local economies during the economic crisis.
In January 2014, Putin stated that the forex rate for ruble should be well balanced. Also, that the national exchange rate would only be controlled by the central bank as it went above the upper or lower bounds of the floating forex rate; and that the more open the Russian national currency, the better and that it would help the country’s economy to respond in a more effective and timely manner.
Though Russia is one of the largest exporters of oil, its currency is not strongly correlated with oil prices due to continuing political uncertainty in Russia.
Additional Resources
CFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst.
In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional resources will be very helpful:
|
||||
9245
|
dbpedia
|
1
| 36
|
https://www.xe.com/currency/rub-russian-ruble/
|
en
|
RUB - Russian Ruble rates, news, and tools
|
[
"https://www.xe.com/svgs/flags/rub.static.svg",
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] |
[] |
[] |
[
""
] | null |
[] | null |
Get Russian Ruble rates, news, and facts. Also available are services like cheap money transfers, a currency data API, and more.
|
en
|
/apple-touch-icon.png
|
https://www.xe.com/currency/rub-russian-ruble/
|
Years Description of the Ruble First ruble 1500s-1921
The ruble remained the official currency of Russia until 1921, when it dramatically fell in value
In 1710, the ruble was given its first subdivision, kopeks, with 100 kopeks making up one ruble
Used a bimetallic standard of gold and silver
In 1885, a new standard was adopted and the ruble was pegged to the French franc at a rate of 1 ruble to 4 francs
Second ruble 1921-1922
A redenomination was set at a rate of 1 new to 10,000 old rubles
Chervonets were also used starting in 1922
Third ruble 1923-1924
The Soviet Union issued a redenomination at a rate of 1 new to 100 old rubles
Fourth ruble 1924-1947
Known as the gold ruble, the fourth version was issued at a rate of 50 000 old to 1 new ruble
Fifth ruble 1947-1961
Following World War II, another redenomination was set at a rate of 10 old to 1 new ruble
Sixth ruble 1961-1997
Based on the 1947 reform, another redenomination was set
After the collapse of the Soviet Union, Russia continued to use the ruble, replacing old banknotes
|
|||||
9245
|
dbpedia
|
1
| 20
|
https://www.globalexchange.com.jm/en/currencies-of-the-world/russian-ruble
|
en
|
Russian Ruble
|
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[] |
[] |
[
""
] | null |
[] | null |
en
|
https://www.globalexchange.com.jm/documents/20151/31618/favicon.png/54a53a66-bc81-dbec-5206-5cee30bb0cd9?t=1667562804900
|
https://www.globalexchange.com.jm/es/monedas-del-mundo/rublo-ruso
|
The rouble became the currency of Russia 500 years ago and it is subdivided into 100 kopeks.
Origins and history
The origins of the rouble date back to 1704, when Peter the Great standardised this coin to 28 grams of silver. On 17th December 1885 a new standard that did not change the silver rouble but reduced the gold content to 1161 grams was adopted.
Later on, during the reign of Nicholas I, the silver rouble was declared as monetary unit and main instrument of payment. Banknotes, on the other hand, were to become a supporting instrument of payment.
Despite the reforms, innovations and trials undergone by the rouble, the currency did not lose value until the Russian Revolution in 1917.
During the dissolution of the Soviet Union in 1991, the Russian currency experienced a modification in its design. At this time, the Central Bank of the Soviet Union (Gosbank) put in circulation new banknotes and coins, which were also issued by the Russian Bank in 1992. That very same year, the Bank of Russia issued its first series of Russian rouble banknotes with a nominal value of 5,000 and 10,000 roubles.
In 1993 there was a new reform that, along with the new banknotes issued, would put a stop to the circulation of soviet models.
In March 2014 the Russian rouble was introduced into the Republic of Crimea and the federal city of Sevastopol, after their annexation to the Russian Federation.
Current Russian rouble banknotes and coins
Today, banknotes in denominations of 5, 10, 50, 100, 500, 1000 and 5000 Russian roubles are in circulation.
Regarding coins, denominations of 1, 5, 10 and 50 kopeks, and 1, 2, 5 and 10 roubles are in use.
|
||||
9245
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dbpedia
|
3
| 39
|
https://www.bloomberg.com/news/articles/2023-08-09/ruble-weakens-toward-100-per-dollar-for-first-time-in-16-months
|
en
|
(RUB USD) Ruble Weakens Toward 100 Per Dollar for First Time in 16 Months
|
[
"https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iPcV3nsq3V2k/v1/-1x-1.jpg"
] |
[] |
[] |
[
"Russia",
"Currency",
"US Dollar Spot",
"Imports",
"Trade Balance",
"Exports",
"Exchange Rate",
"Economics",
"Turkish Lira Spot",
"Argentine Peso Spot",
"markets",
"politics"
] | null |
[] |
2023-08-09T00:00:00
|
The Bank of Russia announced it will halt purchases of foreign currency on the domestic market for the rest of 2023 in an effort to help the ruble as the currency slumped toward 100 per dollar, its weakest in 16 months.
|
en
|
Bloomberg.com
|
https://www.bloomberg.com/news/articles/2023-08-09/ruble-weakens-toward-100-per-dollar-for-first-time-in-16-months
|
The Bank of Russia announced it will halt purchases of foreign currency on the domestic market for the rest of 2023 in an effort to help the ruble as the currency slumped toward 100 per dollar, its weakest in 16 months.
“The decision was made in order to reduce the volatility of financial markets,” the central bank said in a statement late Wednesday.
|
|||||
9245
|
dbpedia
|
0
| 83
|
https://shop.spycraft101.com/products/soviet-kgb-rubles-collection
|
en
|
Soviet KGB Rubles Collection
|
http://shop.spycraft101.com/cdn/shop/products/25Rubles.jpg?v=1637540304
|
http://shop.spycraft101.com/cdn/shop/products/25Rubles.jpg?v=1637540304
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[] |
[
""
] | null |
[] | null |
Get engrossed in the espionage world with our Soviet KGB Rubles Collection. Spycraft 101 is the one-stop destination for the finest espionage products, tales and tools. Shop now !
|
en
|
//shop.spycraft101.com/cdn/shop/files/Gray_Logo_No_Fill_fef7b1b9-4188-4fa5-813c-7025635a5653_32x32.png?v=1645359754
|
Spycraft 101
|
https://shop.spycraft101.com/products/soviet-kgb-rubles-collection
|
Now available, original Rubles from the Soviet Union. These rubles were previously on display at the KGB Museum in New York City. They were showcased to demonstrate how the KGB used cash for operational funds.
When the KGB museum closed in 2020 during the pandemic shutdown, all of their artifacts were auctioned off, including these rubles.
This set includes one bill each in the denominations of :
1 руб
3 руб
5 руб
10 руб
25 руб
These notes are from the 1961 and 1991 issued series. All available banknotes are well worn, having passed through many hands and many transactions over the years before they made their way into the KGB museum's collection. It's hard to imagine all the ways they might have been used during the Cold War.
Although Soviet rubles are available elsewhere, these are the only available rubles in the world with provenance from a KGB museum display. Get yours now before they're gone.
|
||
9245
|
dbpedia
|
2
| 75
|
https://www.cornellpress.cornell.edu/book/9781501758515/stalins-quest-for-gold/
|
en
|
Stalin's Quest for Gold by Elena Osokina
|
[] |
[] |
[] |
[
""
] | null |
[] |
2019-04-02T15:30:59+00:00
|
Cornell University Press fosters a culture of broad and sustained inqiry through the publication of scholarship that is engaged, influential, and of lasting significance.
|
en
|
Cornell University Press
|
http://www.cornellpress.cornell.edu/book/9781501758515/stalin-s-quest-for-gold/
| ||||||
8397
|
dbpedia
|
2
| 7
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https://alokastrology.com/facts-about-varahamihira-the-multi-talented-genius-sage/
|
en
|
Facts about Varahamihira
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[] |
[] |
[
""
] | null |
[
"Alok Khandelwal"
] |
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Varahamihira who is known to have lived from 505 CE to 587 CE in Ujjain was an astrologer, astronomer and polymath expert. Varahamihira lived in the Gupta
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As we all know heights can’t be touched without effort, for that it is needed to prove the eligibility. Like that, Mihir was not chosen as the minister in the kingdom from the beginning, but he earned this position due to his absolute prediction and which turned his name to “Varah Mihir”.
In the era of Vikramaditya, who is also known as Chandragupta-II in history, Mihir was so famous being a jyotshi and till that time, none of the predictions went wrong. Once the supreme King, called for Varah Mihir to his
court to verify his wisdom about Astrology in the presence of other ministers and Queen Virasena.
All the questions related to Astrology, asked by other ministers and members of the court, were properly answered by “Mihir” and the King pleased of such an unbeatable talent in his kingdom and finally asked to predict his future and his kingdom.
After going through the birth chart of the King, Mihir got silent and the entire court was staring at Mihir’s silence. Breaking the silence and with full of grief, the greatest astrologer confirmed his prediction that, the position of the planets says, the death of prince will happen at the age of 18.
The entire court got shocked with such prediction, but the queen did not believe this and disregarded Mihir. We all know King Vikramaditya is famous for his justice and in stories it is mentioned that Goddess Laxmi and Shanidev also came to Vikramaditya to verify his way of justice, that is another story, we may discuss any other day.
With a heart of stone, at that moment, the King asked Mihir to predict the exact date, time and reason of death and it was predicted as “the event will happen by a Boar [Varah in Hindi]” which was predicted before 6 years, when the prince was at age of 12. Before the predicted day, Mihir was again invited to the court and was requested to stay there till that date. King surrounded his city with proper boundaries and barricades and also his palace, increased the security for the prince and the palace and announced to kill if any boar is seen near the palace, means King was fully prepared to protect his son from attack of any boar.
At the exact predicted time, the sound of groaning came out of the prince’s room and it was seen that the Prince is about to die and died also in sometime. According to some scripts, it is mentioned as a boar which was coloured as white because of lime, entered into the room and killed the prince and other scripts say an idol of a boar fell down on the prince. But, both the scripts indicates to the same, the death was occurred by a boar.
The King announced the victory of Mihir and the failure of himself, but Mihir said,” this is not me, who won this or this was not any war. This is the Science of astrology and astronomy, which I predicted for a human being”.
And the king said, “I admire to the astrologer. The science you are talking about is nothing but Truth”. And for the mastery in this subject, the king conferred upon the greatest award, the emblem of “Varah”, and after that “Mihir” was renowned as “Varah Mihir”. If we can see the names of other rest ministers of Vikramaditya, we can understand they got some strange names, like “Betal bhatt”,” Amar-Simha”,”Khyapanak”. The suffix or prefix on their names, are nothing but the awards given by the King.
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VARāHAMIHIRA(fl. near Ujjain, India, sixth century)astronomy, astrology. Source for information on Varahamihira: Complete Dictionary of Scientific Biography dictionary.
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VARāHAMIHIRA
(fl. near Ujjain, India, sixth century)
astronomy, astrology.
The best-known and most respected astrologer of India, Varāhamihira was the son and pupil of Ādityadāsa, a Maga Brāhmana and descendant of Iranian Zoroastrians who immigrated to northern India in the centuries about the beginning of the Christian era and who, while retaining some traces of the solar worship of their forebears, were absorbed into Hinduism. Varāhamihira himself stated that he was a native of Avantī or Western Mālwä (the region about Ujjain) and that he resided in the village Kāpitthaka, which is probably to be identified with the ruins at Kayatha about twelve miles from Ujjain. His date is established by his own adaptation in the Pañcadiddhāntikā of Lāta’s epoch, 505, and by the references to him as an authority in the Brāhmasphutasiddhānta composed by Brahmagupta in 628. It has further been suggested that he was connected with the Aulikara court at Daśapura (Mandasor), and in particular with Yaśodharman, who was reigning in 532.
His numerous writings covered all of the traditional fields of astrology and astronomy in India, generally in pairs. It is evident from internal crossreferences that he composed the Pañcasiddhäntikä and Brhatsamhitā simultaneously toward the beginning of his career, although some additions were made to the latter after his other major works were completed. The Brhajjätaka was probably composed toward the end of his life, and the other treatises fall somewhere in between.
Varāhamihira was not original in his writings. In genethlialogy he depended primarily on Sphujidhvaja’s and Satya’s expositions of an Indianized Greek system, in divination on the Indian adaptations by Garga and others of Mesopotamian omen-series, and in astronomy on representatives of three traditions : the Mesopotamian-influenced vedāñga-astronomy as represented in the first century Paitāmahasiddhānta, the Indian versions of Greco-Babylonian solar, lunar, and planetary theory in the Vasisthasiddhānta and Pauliśasiddhānta, and the essentially Hellenistic astronomy of the Romakasiddhānta and Läta’s Süryasiddhānta. Since we have very few other sources for studying these traditions in India in the period before 500, Varāhamihira’s work is extremely valuable; and as we know little else about the Greek traditions that the sources of the Pañcasiddhäntikā depend on, it affords us a most useful if somewhat problematic insight into pre-Ptolemaic Greek astronomy.
Varāhamihira’s works are as follows:
1. The Pañcasiddhātikā, edited with translation and commentary by O. Neugebauer and D. Pingree, 2 pts. (Copenhagen, 1970–1971). This difficult text deals with solar, lunar, and planetary theory; problems of time and terrestrial latitude: eclipses: astronomical instruments: and cosmology. Something has been said of its sources and its importance above.
2. The Brhatsambitā on divination, edited with the commentary of Utpala (966) by Sudhākare Dvivedin, 2 vols. (Benares, 1895–1897; repr., Benares, 1968); there are several English translations, of which the best is H. Kern, “The Brhat-Sañhitā,” in Journal of the Royal Asiatic Society (1870), 430–479; (1871), 45–90, 231–288; (1873), 36–91, 279–338; and (1875), 81–134; this was reprinted in H. Kern, Vespreide Geschriften, 16 vols. (The Hague, 1913–1929), I 169–319, and II , 1–154. This extensive treatise, besides being one of the most complete extant Sanskrit treatises on divination, is very valuable for the information it contains about Indian geography and society: see, for instance, J. F. Fleet, “The Topographical List of the Brihat-Sanhita,” in Indian Antiquary, 22 (1893), 169–195; and A. M. Shastri, India as Seen in the Brhatsamhitā of Varāhamihira (Delhi-Patna-Varanasi, 1969).
3. The Samāsasamhitā, Varāhamihira’s shorter work on divination. This is now lost, but many of the quotations from it can be found in A. M. Shastri, “Contribution Towards the Reconstruction of the Samāsa-Samhitā of Varāhamihira,” in Bhāratīya Vidyā, 23 (1963), 22–39.
4. The Vatakanikā, a third work on divination, is also lost save for some quoted verses; see P. V. Kane, “The Vatakanikā of Varāhamihira,” in Vishveshvaranand Indological Journal, 1 (1963), 63–65.
5. The Brhajjātaka, Varāhamihira’s major work on genethlialogy; it has often been commented on and often translated. The most useful commentary is that of Utpala (966), published, for example, at Bombay in 1864. This is still the standard work on natal horoscopy in India. For its relation to Greek astrology, see The Yavanajātaka of Sphujidvaja, D. Pingree, ed., which is to appear in the Harvard Oriental Series.
6. The Laghujātaka is the shorter treatise on genethlialogy. It also was commented on by Utpala, and it was translated into Arabic by al-Bīrünī, who inserted it into his India. There are many editions: for example, with the Hindī ortikā of Kāśīrāma (Bombay, 1936). Unfortunately, there exists no critical edition of either of these popular textbooks on genethlialogy.
7. The Brhadyātrā is a major treatise on military astrology. An edition of it with the surviving fragment of Utpala’s commentary, prepared by D. Pingree, is in Bulletin of the Government Oriental Manuscripts Library, Madras, 20 (1972), 1, app., 1–92; 2, app., i-xiv; and 93–130; repr. (Madras, 1972).
8. The Yogayātrā is a shorter text on military astrology. The first nine chapters were published by H. Kern, “Die Yogayātrā des Varāhamihira,” in Indische Studien, 10 (1868), 161–212; 14 (1876), 312–358; and 15 (1878), 167–184; and the whole, in imperfect fashion, by J. Lal (Lahore, 1944). A critical edition of the text with the commentary of Utpala has been prepared by D. Pingree.
9. The Tikanikāyātrā is a third treatise on military astrology. It was edited by V. R. Pandit, “Tikanikāyātrā of Varāhamihira,” in Journal of the University of Bombay, 20 (Arts, No. 26) (1951), 40–63.
10. The Vivāhapatala, a text on astrology as related to marriage, is preserved in a unique manuscript at Baroda. An edition has been prepared by V. R. Pandit.
BIBLIOGRAPHY
Additional bibliographical references to those given above will be found in O. Neugebauer and D. Pingree, Pañcasiddhāntikā, II, pp. 152–154; A. M. Shastri, India as Seen in the Brhatsamhitā pp. 504–515; and D. Pingree, Census of the Exact Sciences in Sanskrit, series A, V. (forthcoming).
David Pingree
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Utpala (astronomer)
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Utpala, also known as Bhaṭṭotpala was an astronomer from Kashmir region of present-day India, who lived in the 10th century. He wrote several Sanskrit-language texts on astrology and astronomy, the best-known being his commentaries on the works of the 6th-century astrologer-astronomer Varāhamihira.
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https://www.wikiwand.com/en/Utpala_(astronomer)
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Commentator on astronomical treatises / From Wikipedia, the free encyclopedia
Dear Wikiwand AI, let's keep it short by simply answering these key questions:
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Summarize this article for a 10 year old
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Varahamihira - Kids
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Mathematician:Varahamihira
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Mathematician
Indian astronomer, mathematician, and astrologer.
One of several early mathematicians to discover what is now known as Pascal's triangle.
Defined the algebraic properties of zero and negative numbers.
Improved the accuracy of the sine tables of Aryabhata I.
Made some insightful observations in the field of optics.
Nationality
Indian
History
Born: 505 CE, Kapitthaka, Avanti region (roughly corresponding to modern-day Malwa)
Died: 587 CE
Theorems
Sum of Squares of Sine and Cosine
Sine equals Cosine of Complement
Square of Sine
Publications
c. 575: Pancha-Siddhantika (or Pañcasiddhāntikā) ([Treatise] on the Five [Astronomical] Canons), a summary of five works, now lost:
Surya Siddhanta
Romaka Siddhanta
Paulisa Siddhanta
Vasishtha Siddhanta
Paitamaha Siddhantas
Several works on astrology:
Brihat Jataka: one of the five main treatises on Hindu astrology on horoscopy
Laghu Jataka (also known as Swalpa Jataka)
Samasa Samhita (also known as Lagu Samhita or Swalpa Samhita)
Brihat Yogayatra (also known as Mahayatra or Yakshaswamedhiya yatra)
Yoga Yatra (also known as Swalpa yatra)
Tikkani Yatra
Brihat Vivaha Patal
Lagu Vivaha Patal (also known as Swalpa Vivaha Patal)
Lagna Varahi
Kutuhala Manjari
Daivajna Vallabha (apocryphal)
Also known as
The name can also be rendered Varāhamihira.
Sources
John J. O'Connor and Edmund F. Robertson: "Varahamihira": MacTutor History of Mathematics archive
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Varahamihira(505-587 CE): Astrologer & astronomer – Hindu Scriptures
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“Varahamihira wrote the Brihat samhita, an influential encyclopedic text in Sanskrit. This text exists in many Indian scripts, and was copied, preserved in Hindu, Jain and Buddhist temples and monasteries.”
Varahamihira was a renowned astrologer, who was honored with the special accolade and status as one of the ‘nine gems’ at the court of King Vikramaditya in Avanti (Ujjain). Born to a prominent astrologer himself, he introduced many Astrological granthas which elevated astrology to the level of a science. Varahamihira introduced four typeof months which include the Solar Month, Lunar Month, Yearly Month, and Fortnightly Month. It is said that he had the benefit of the mathematician Aryabhatta as a teacher, and proved himself to be a worthy student.
Varahamihira divided astral science or jyotisha shastra into three main branches:
(1) mathematics (ganita), including mathematical astronomy (ganita antariksha vzjnana)
(2) horoscopic astrology (hora)
(3) natural astrology or divination (jyotisha vijnana) in general He wrote several books on the second and third branches. His only work on the first branch, Panchasiddhantika, is a compendium of the texts of the earlier astronomical schools or systems.” They were: Paitdmaba, Vasishtha, Romaka, Paulisha and Surya Siddhanta.
Of the five only a full text of the Surya Siddhanta is available today. It mainly deals with the mean diameters of the sun and moon, mean revolutions of the planets, intercalary months, true longitudes of planets, and calculation of lunar and solar eclipses.
Varahamihira’s other most important contribution is the encyclopedic Brihat-Samhita. It covers wide ranging subjects of human interest, including astrology, planetary movements, eclipses, rainfall, clouds, architecture, growth of crops, manufacture of perfume, matrimony, domestic relations, gems, pearls, and rituals. The volume expounds on gemstone evaluation criterion found in the Garuda Purana, and elaborates on the sacred Nine Pearls from the same text. It contains 106 chapters and is known as the “great compilation”.
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By D.P. Agrawal
Question: Did you know Bhaskaracharya? What was he famous for and when did he live?
Bhaskaracarya was a mathematician-astronomer of exceptional abilities. He was born in 1114 AD.
Mathematics became the hand-maiden of astronomy and, from the time of Aryabhata I, it began to be incorporated in astronomical treatises. Thus all components of mathematics came to be developed: geometry, trigonometry, arithmetic and algebra. The great astronomers had to be great mathematicians too.
The great astronomer-mathematicians of the Siddhanta period, in a chronological order were: Aryabhata I, Varahamihira, Brahmagupta, Aryabhata II, Sripati, Bhaskara II (known popularly as Bhaskaracarya), Madhava, Paramesvara and Nilakantha. These great scientists, except the last three, grew in different parts of this vast sub-continent. Perhaps such isolated growth may explain the apparent abruptness in astronomical and mathematical development in India. Even before Bhaskara made his mark on Indian Jyotisa, there were three distinct schools, the Saura, the Arya and Brahma. Bhaskara was respected and studied even in distant corners of India. Bhaskara was perhaps the last and the greatest astronomer that India ever produced.
Brahmagupta was Bhaskara's role model and inspirer. To Brahmagupta he pays homage at the beginning of his Siddhanta-siromani and most of his astronomical elements are taken from the Brahmasphuta siddhanta or the Rajamrganka belonging to the same school. Bhaskara improved upon him not through any great original contribution but by the thoroughness with which he could and did analyse the rationale of the calculations. Bhaskara's exhaustiveness was so profound that his works have not only eclipsed lesser works but even the works of his great master Brahmagupta himself.
Bhaskara was born in Saka 1036 (1114 A.D.) and composed his masterpiece Siddhanta-siromani at the age of thirty-six. His second work, the Karanakutuhala was composed at the age of sixty-nine. The sharpness of his keen mind seems to have remained undiminished over a long period. Some details of his family too are known through the Goladhaya of the Siddhanta-siromani. His father, Mahesvara, was an astronomer well-versed in all the branches of learning and was Bhaskara's guru. He belonged to the Sandilya gotra, and lived in Vijjadavida near the Sahya Mountain. This information is corroborated and supplemented by two stone inscriptions in temples, one at Patan and the other at Behal. The first of these mentions five ancestors and the son and grandson of Bhaskara. Amongst the ancestors is Trivikrama, who is the poet Trivikrama, author of the Damayantikatha and the son Laksmidhara is said to have been called away from Patan to be the court pandit of king Jaitrapala. The grandson Cangadeva was astrologer royal to the Yadava king Singhana of Devagiri and got the incription engraven, established an institute for the study and propagation of Bhaskara's works. Bhaskara's whole family was one of scholars and most of the members were astrologers attached to royal houses. Curiously enough, there is no mention of Bhaskara himself being the astrologer royal to any king. Perhaps he disdained the work of a professional astrologer as is hinted at in the story of Bhaskara writing his work Lilavati for the sake of his daughter, elaborated with delicate fancy by Edna E Cramer in her Mainstream of Mathematics. The inscription at Behal gives the lineage of another son Sripat of Mahesvara. In the Persian translation of Bhaskara's Lilavati, prepared at the behest of the Mughal emperor Akbar, Bedar is mentioned as the native place of Bhaskara. But this place is not near the Sahya Mountain. Vijjadavida, the now unknown native place of Bhaskara, must have been somewhere near Patan.
Bhaskara is known for his two main works: a 'Siddhanta' text, the 'Siddhanta-siromani' and a 'Karana' text, the 'Karanakutuhala'. The former is in four parts, viz. (i) Patiganita or Lilavati, (ii) Bijaganita, (iii) Grahaganita, (iv) Goladhyaya. Of these, the first two are usually treated as separate treatises. The Lilavati deals with arithmetic and geometry; it is said that the name is after his daughter Lilavati, who was according to her horoscope to remain unmarried. There is a story which says that Bhaskara put to use all his astrological knowledge to find out an auspicious moment for her marriage, and on the marriage day had a water-clock fixed up as to hit the exact time favourable for her happy marriage, but his efforts were foiled by the child-bride herself. Impelled by girlish curiosity she kept on running to the water-clock and bending to peer at it. In one of these visits to the water-clock, a pearl loosened from her neck and got stuck to the hole of the water-clock. The auspicious moment passed unnoticed and the girl had to remain unmarried. To console her and perpetuate her name Bhaskara called his treatise on arithmetic and geometry by her name. According to others, Lilavati was the name of Bhaskara's wife. More probably Bhaskara was attracted by this fanciful name. Bhaskara was known not only for his mathematical scholarship, but also for his poetic inclinations.
In the Lilavati the eight mathematical operations (parikarmastaka), addition, subtraction, multiplication, division, squaring, cubing, extraction of square and cube-roots are dealt with first. The operations with zero (sunyaparikarma) follow. Then come vyastavidhi (method of inversion), istakarma (unitary method), sankramana (finding a & b when a+b and a-b are known i.e., the method of elimination), vargasankramana (finding a & b from a-b and a2 -b 2 ), vargakarma (finding a & b so that a2+b2-1 and a2-b2-1 may be perfect squares), mulagunaka (problems involving square roots i.e. those which lead to quadratic equations); trairasika (rule of three); bhandapratibhandaka (barter), misravyavalara (mixtures), srenivyavahara (series); ankapasa (permutations and combinations) and kuttaka (indeterminate analysis). In fact, some of these topics like series, permutations and combinations and indeterminate analysis more properly come under algebra.
The section on geometry (ksetraganita) opens with the enunciation of the theorem of the square of the hypotenuse. But the enunciation is algebraic rather than geometrical and leads on to the solution of rational right triangles and height and distance problems. The condition for given lengths of sides forming the sides of a closed rectilinear figure is then given. The rules for calculating the attitude, area, etc., of triangles and different types of quadrilaterals come next. After criticising Brahmagupta's rule for finding the diagonals of quadrilaterals, he gives his method of getting a rational quadrilateral by the juxtaposition of rational right triangles and shows how the diagonals are then easily found. Circles are dealt with next, a very satisfactory approximate formula for calculating the arc in terms of the chord and vice versa were given, so also are given the correct expressions for the volume and surface of a sphere. Though Sridhara before Bhaskara gave the correct expression for the volume, Bhaskara's is in more general terms. The sides of rectilinear figures with 3,4 .9 sides are calculated next. Khatavyavahara (section on excavations) and krakacavyavahara (shadow problems) cover some interesting problems. Except for the section on permutations and combinations, the scheme is the same as that in the mathematical chapters of the Brahmasphutasiddhanta. But Bhaskara's treatment is always richer and more comprehensive.
The topics in the Bijganita are fundamental operations with positive and negative quantities (ghanarnasadvidham) with zero (sunyasadvidham), with symbols (varnasadvidham) and with surds (karanisadvidham); indeterminate simple equations (kuttaka); indeterminate equations of second degree (vargaprakrti) equations in one unknown (elavarna-samikaranam); solving quadratic equations by completing the square (madhyamaharanam); equations in more than one unknown (anekavarnasamikaranam), equations involving products of the unknowns (bhavita).
In the Grahaganita and Gola chapters after the preliminary disquisition on the importance of the astronomy of the heavenly bodies, the Prasnadhyaya (chapter of questions) asks a series of questions which are discussed in the succeeding chapters. The third chapter, Bhuvanakosa (the universe), asserts the unsupported situation of the earth in space and explains how beings exist on the surface of the round earth. The measurement of the circumference, surface area and volume of the earth is next dealt with. A good approximation for p (namely p = 3.1416) is used for these calculations. The fifth chapter titled Madhyamagativasana treats of the mean motions of the sun, moon and the planets. Like the other Indian astronomers, Bhaskara too ignores the thesis put forward by Aryabhata that the stationary stars appear to move to the observer on the revolving earth. The next chapter, chedyakadhikara, describes the true motions of the heavenly bodies. The true motions, says Bhaskara, can either be represented as motion along a small circle or as motion centre moves along the circumference of a circle whose centre does not lie at the centre of the earth. The diagrammatic representation of the true motions is termed 'chedyaka'. In the Golabandhadhikara, Bhaskara explains how models of the celestial sphere with the orbits of the sun, moon and the planets are constructed by the teacher of astronomy. The eighth chapter, Triprasnavasana, tells us how to know the time of sunrise, the relative lengths of the day and night in different seasons and at different latitudes, and the latitude of a place. The next three chapters are devoted to eclipses. The Yantradhyaya describes the astronomical instruments used for observing the heavenly bodies but ends it with the remark that intelligence is a better tool than all these, which is significant from an astronomer who seems to have neglected practical observation. Some machines with no astronomical application are also included in the list. One chapter is devoted to a poetic description of the seasons, another to astronomical questions and their answers.
The last chapter is again devoted to Jyotpati (calculation of sine), which gives different methods of calculating the sine. The whole text of the Grahaganita and the Goladhyaya has a commentary (vasana) attached to it, written by Bhaskara himself.
Amongst Bhaskara's noteworthy contributions to mathematics is his finding of the correct volume of a sphere by dividing it into pyramids with their apexes at the centre and bases on the surface of the sphere and of the correct surface area of a sphere by cutting up the surface into concentric rings and into lenticular strips and adding up their areas. How exactly this is done is not clear, but some scholars think it is by a sort of differentiation-integration. Bhaskara's treatment of the mathematics of the zero is remarkable for the undoubted realisation that any quantity divided by zero is infinity (termed Khahara or Khahara having zero as divisor) and for the implied concept of the infinitestimal. In the calculation of the instantaneous motions of planets he seems to anticipate differentiation.
Bhaskara took all the astronomical elements from the older works, chiefly the Brahmasphutasiddhanta and the Rajamrganka. The high fame the Siddhantasiromani has achieved is due to the fact that every thing of Indian astronomy is to be found in it. The period between Aryabhata I and Bhaskara II was the golden age of Indian Jyotisa. It saw the production of many astronomical works, but they were all pushed to the background, by the brilliant exposition and the analytical power displayed by Bhaskara. So thorough and so sure was his treatment that no need for further improvement was felt. The later works were almost all commentaries on Bhaskara's works.
Unlike most of the scientific works originating in the south, Bhaskara's works were not unknown in the north. They were studied with great assiduity. Many of the developments in mathematics are embedded in the commentaries on the Lilavati. The Siddhantasiromani too enjoyed great popularity. Bhaskara calculated the equinoctial shadow at any place and the new corrections to be applied to the calculation of the time of sunrise. The precession of the equinoxes too was accepted by Bhaskara, though later astronomers allowed Bhaskara's correct theory to be perverted. All this shows beyond doubt that Bhaskara was blessed with a remarkably active brain. Bhaskara's works have served as reference books in every nook and corner of India.
The Karankutuhala, like other Karana works, is a manual for easy astronomical calculations. Even now it is used for making calendars in many parts of India.
The number of commentaries testifies to the popularity of Bhaskara's works. The Lilavati has the largest number. Some amongst these like the Gantikaumudi of Narayana Pandita, son of Nrsimha, are almost independent works bringing in much new matter. Others like Kriyakramakri while faithfully commenting on the Lilavati verses one by one, supplement the information contained in the Lilavati with many new discoveries. More than twenty commentaries on the Lilavati have already been brought to light. There may be more. On the other sections of the Siddhantasiromani and on the Karanakutuhala too there are a number of commentaries. In 1577 A.D. the Lilavati was translated into Persian and the Bijaganita in 1665. In modern times Colebrooke translated the Lilavati and the Bijaganita. The Lilavati is rated so high in popular opinion that there is a saying that a person well up in the Lilavati will be able even to find out the exact number of the leaves on a tree.
Sources and Further Reading
Bose, D.M., S.N. Sen and B.V. Subbarayappa.(Eds.). A Concise History of Science in India. New Delhi: Indian National Science Academy.
Chattopadhyaya, Debiprasad.(Ed.). 1981. History of Science in India. Volumes 1& 2. New Delhi: Editorial Enterprises
Saraswathi, T.A..1990. Bhaskaracarya. In V. Raghavan (Ed.) Scientists. Delhi: Publications Division.
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Varahamihira: Ancient Indian Scientist’s Contribution to Hydrology, Geology, Astronomy
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2021-01-28T00:00:00
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Ancient Indian scientist Varahamihira and his contribution to hydrology, geology, ecology is unmatched. He described these in Brihat Samhita.
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myIndiamyGlory
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https://www.myindiamyglory.com/2021/01/28/varahamihira-contribution-to-hydrology-geology-astronomy/
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He was an astronomer, astrologer, scientist, polymath. This ancient Indian scientist wrote the Brihat Samhita, a comprehensive encyclopaedia of the sciences. His book Pañcasiddhāntikā is a treatise on mathematical astronomy and more, where he also gave references to five older astronomical treatises. He learnt Greek. In Pañcasiddhāntikā, he also described Western astronomy, especially Greek with elements of Roman and Egyptian, which corroborate his expertise in the subject beyond India. Hora Shastra also called Brihadjathaka is his book on astrology, which is a treasurehouse of information for astrologers and astro-researchers. He excelled in myriad subjects, from astronomy, astrology, mathematics, timekeeping, perfumes to hydrology, geology, ecology, temple architecture, optics and many more. He is Varahamihira, also popular as Varaha and Mihira.
When was Varahamihira born? Brian Evans in his book The Development of Mathematics Throughout the Centuries: A Brief History in a Cultural Context describes Varahamihira’s timeline at 505 – 587 CE. This is the timeline that history textbooks and mainstream narratives cite and acknowledge. Vedveer Arya’s book Chronology of India puts it at 25th or 26th March 146 BCE – 74 BCE; the author is backed by several evidences to this claim. Going by Vedveer Arya’s reference, Varahamihira lived over 2000 years ago. To quote from Vedveer Arya’s Chronology of India, “A verse from a lost text named Kutūhalamañjari informs us that Varāhamihira was born in the 8th tithi of the bright half of Chaitra month, in Jaya saṁvatsara and the year 3042 of Yudhiṣṭhira era. The era of the son of Sūrya-Sūnu is identical with the epoch of 3188 BCE when Yudhiṣṭhira ascended the throne of Indraprastha. Thus, the year 3042 was 146 BCE which was also the Jaya saṁvatsara. Since Varāhamihira died in 74 BCE, Jaya saṁvatsara of 146 BCE was indeed his birth year. He was born on Chaitra Śukla Aṣṭamī, i.e., 25/26 Mar 146 BCE. Thus, we can accurately fix the lifetime of Varāhamihira around 146-74 BCE.”
The ancient Indian scientist was born in the Malwa region, which was known as Avanti during those times. Avanti, that finds mention in the Buddhist scripture Anguttara Nikaya, was one of the 16 Mahajanapadas. This Mahajanapada was further divided into Ujjaini in the north and Mahismati in south, both divided by the Vindhyas. Varahamihira’s father was Adityadasa.
Varahamihira was educated at Kapitthaka, a place mentioned by the scientist himself in his book in a shloka.
Where is Kapitthaka, the place where Varahamihira received educational enlightenment, located? While few scholars concluded about this place to be in the Malwa region, few speculate it to be in present UP. DG Dhavale in ‘THE KAPITTHAKA OF VARAHAMIHIRA’ published in Insa gives references of three different sites for Kapitthaka – Sankisa on the banks of the Kalinadi in UP, Kalpi on the banks of the Yamuna, and Kayatha near Ujjain. Sankisa is quoted by Cunninghum in his book Ancient Geography of India wherein the author further quotes Huen Tsang to prove his claim that Sankisa was Kiapitha or Kapitha, suggesting it to be the place where Varahamihira studied. Dhavale and more scholars reject the claim that Kapitthaka was Kalpi. However, Dhavale concludes the third option, i.e. Kayatha to be valid, as this claim is further evidenced by another manuscript reference. It is highly probable that Varahamihira studied in a place not far from his place of birth. Archaeological excavations prove the Malwa region to be a flourishing cultural centre. This further justifies the location of Kapitthaka to be in the Malwa region, not very far from Ujjain.
Varahamihira was one of the Navaratnas, the 9 gems, in the court of Raja Vikramaditya. According to Vedveer Arya’s Chronology of India, Vikramaditya was born in 101 BCE and ascended the throne in 82 BCE. Varahamihira was in the court of Vikramaditya around 82-74 BCE.
The Brihat Samhita, a comprehensive encyclopaedia of the sciences, describes topics ranging from astrology, planets, asterisms, planetary conflicts, moon, stars, clouds, rainfall, conjunction of moon with the nakshatras, plants, earthquake, meteors, hurricanes, crops, substances, perfumes, seats to swords, house-building, temples, animals, women, affection, gemstones, lunar days, transit of planets, marriages, and the list goes on. Here is a screenshot of the contents of Brihat Samhita of Varahamihira, translated by Panditbhushan V. Subrahmanya Shastri and Vidwan M. Ramkrishna Bhat.
Ancient Indian Rishis, from as early as the Rigvedic era from at least 13,000 plus years ago, depicted about meteors or comets and their varieties and features. All without modern equipment or facilities like telescopes! And their observations were accurate, matching with modern records. Varahamihira in his books Pañcasiddhāntikā and Brihat Samhita described various comets. He wrote how ancient Rishis like Garga, Parasara, Asita, Devala had already written about comets. In Pañcasiddhāntikā, Varahamihira quotes and describes five older astronomical texts, namely the Surya Siddhanta, Romaka Siddhanta, Paulisa Siddhanta, Vasishtha Siddhanta and Paitamaha Siddhanta by ancient authors.
The book Chronology of India by Vedveer Arya cites Varahamihira and other ancient texts to fix the timelines of several comets observed and described during Vedic era starting from Vasaaketu at 11907 BCE, Asthiketu at 11777 BCE, Shastraketu at 11647 BCE to Rashmiketu at 10646 BCE, Samvartakaketu at 9638 BCE. Varahamihira too observed meteors, which he described in detail. To quote shloka 8 from Chapter 33 of Brihat Samhita translated by Panditbhushan V. Subrahmanya Shastri and Vidwan M. Ramkrishna Bhat:
In the Brihat Samhita, Varahamihira described various forms of earthquakes including symptoms and predictions. In the first few shlokas, he exposed the misconceptions and debunked the various existing theories from across the world. He then put his own observations. For example, for earthquakes caused by the ‘wind circle’ that occurs in Nakshatras – Uttara, Hasta, Chitra, Swati, Punarvasu, Mrigashira, and Ashwani, symptoms get revealed in advance. ‘Quarters get covered with smoke, wind blows lashing with the dust of the earth and breaking trees, sun does not cast bright rays’. For ‘fire circle’ that occurs in Nakshatras – Pushya, Krittika, Vishakha, Bharani, Magha, Purvabhadra, and Purvafalguni, symptoms get revelaed a week in advance too. The sky gets covered with the fall of meteors and also appears illuminated owing to the fire in the horizon; lakes and tanks dry up. Likewise, Varahamihira describes two more forms of earthquakes – ‘Indra cycle’ and ‘Varuna cycle’ at the same time describing the Nakshatras where they occur. He related the four types of earthquakes to the influence of planets, unusual formation of clouds, undersea activities, underground water, and more symptoms. While today we have technology predicting about earthquakes in advance, Varaamihira described similar symptoms 2000 plus years ago!
Varahamihira described different types of gemstones and their attributes according to geographical locations across the country in the Brihat Samhita. The weight of diamonds and corresponding prices are described. The ancient scientist categorizes eight sources of the best pearls – Simhaloka, Paraloka, Saurashtra, Tamrapani, Persia, North of the country, Pandya Vataka, and the Himalayas. From Varahamihira’s book, one can estimate the value of various gemstones including diamonds, pearls, rubies, emeralds some 2000 plus years ago!
Varahamihira excelled in many subjects. His contribution to Mathematics is greatly recognized today. His discovery of the trigonometric formulas, perfecting the accuracy of the sine tables of Aryabhata l, defining negative numbers and the algebraic properties of zero have been serving as a boon for future generations from his times. He was one of the first mathematicians to calculate the binomial coefficients with a version of what is today known as the Pascal’s triangle – a triangular array constructed by summing adjacent elements in preceding rows. Pascal’s triangle is named after Blaise Pascal, a French mathematician. While Pascal lived in the seventeenth century, Varahamihira lived some 1400 years before him!
How was time measured during ancient times? The sun dial was one of the most ancient of time measuring instruments wherein a simple stickin the ground was used. This was followed by invention of more advanced sun dials and sand yantras. The Qutub Minar is believed to be an astronomical tower built by Raja Vikramaditya under the instructions of Varahamihira. The tower incorporated all the measurements of time, right from hours to days, weeks, and the year. The sun dial helped determine time during sunny days. What about time measurement during cloudy days? Ancient Indians invented a solution too! They invented water clocks, called ghatika yantras, which find mention in several ancient texts including Atharvaveda, Puranas, and by Varahamihira in Pañcasiddhāntikā. Most of the Sanatana religious rituals and practices are scientific in nature. For example, the ghata yantra used above many a Shivalinga where water pours down over the linga drop by drop, also served as a time measuring instrument. Varahamihira explains in detail about the ghatika yantra, the water clock in his book. Nalanda University and many archaeological sites have evidences of the use of water clocks in ancient and medieval India.
In the field of astronomy and astrology, Varahamihira’s work is monumental. He has not only described diameters of planets of the solar system but also derived the value of equinox, which according to today’s equipment based calculations, are almost accurate. How could Varahamihira and the ancient Indian Rishis calculate such without the use of advanced equipment like that of present times!! His works on these two interconnected subjects are a whole encyclopaedia containing the A-Z of the planets, asterisms, nakshatras, planetary conflicts, meteors, conjunctions, eclipses, and the list goes on. Varahamihira’s astrological predictions were so precise that Raja Vikramaditya conferred him the title of ‘Varaha’.
The study of water, right from the earth’s surface and beneath, its chemical and physical properties, its occurrence and movement, and its relationship with the environment and living beings is termed as Hydrology. Varahamihira’s contribution in the field of hydrology centuries ago is immeasurable. He understood the fundamental connections between plants, humans, animals, which he described in his works. His description of the earth is same as what is described today! Varahamihira was one of the first scientists to assert that termites and plants could be the pointers of the presence of underground water. His description of how termites function is noteworthy. He also described various plants and animals as indicators of the availability of water at a particular location.
The aforementioned is only a partial list of the contribution of Varahamihira in many fields some 2000 plus years ago!
Ref:
1. Brihat Samhita of Varaha Mihira by Varahamihira; translated by Panditbhushan V. Subrahmanya Shastri and Vidwan M. Ramkrishna Bhat
2. The Development of Mathematics Throughout the Centuries: A Brief History in a Cultural Context by Brian Evans.
3. Chronology of India by Vedveer Arya.
4. ‘Varāhamihira’ by John J O’Connor and Edmund F Robertson.
5. ‘THE KAPITTHAKA OF VARAHAMIHIRA’ by DG Dhavale in Insa.
Featured image courtesy: Google.
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https://rajarammohanroy.medium.com/zero-points-of-vedic-astronomy-a6130ff42455
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Zero Points of Vedic Astronomy
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2021-02-12T21:23:45.821000+00:00
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Varahamihira should be dated using the Cyrus Shaka era of 550 BCE. Varahamihira wrote Panchasiddhantika in 427 Shaka or 123 BCE. This makes him the senior contemporary of Emperor Vikramaditya.
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https://miro.medium.com/v2/5d8de952517e8160e40ef9841c781cdc14a5db313057fa3c3de41c6f5b494b19
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Medium
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https://rajarammohanroy.medium.com/zero-points-of-vedic-astronomy-a6130ff42455
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Discovery of the Original Boundaries of Nakshatras
According to the Indian tradition, Varāhamihira was one of the nine gems in the court of Emperor Vikramāditya. Vikrama era named after Emperor Vikramāditya has its zero point in 57 BCE. Modern history denies the existence of Emperor Vikramāditya in 57 BCE and has placed Varāhamihira in sixth century CE, whose time was in 1st century BCE if Indian tradition is to be believed. The reason for this disagreement lies in the interpretation of Śaka era used by Varāhamihira.
1. A tale of two eras
Varāhamihira has himself given his date by saying that he wrote Pañchasiddhāntikā in 427 Śaka [1]. Based on the zero point of Śaka era in 78 CE, Varāhamihira wrote Pañchasiddhāntikā in 505 CE. However, Varāhamihira has defined the Śaka era used by him in Bṛhat Saṃhitā, which is reproduced below [2]:
āsanmaghāsu munayaḥ śāsati pṛithvīn yudhiṣṭhire nṛipatau
ṣaḍdvikapañcadviyutaḥ śakakālastasya rājyasya.
English translation of this verse has been provided by Alexander Cunningham in 1883 CE as follows [3]:
The seven seers were in Maghā when king Yudhiṣṭhira ruled the earth, and the period of that king is 2526 years before the Śaka era.
The verse gives the information that the difference between the zero points of Yudhiṣṭhira era and Śaka era was 2,526 years. This information can have two different interpretations. Alexander Cunningham interpreted this verse as defining the time of King Yudhiṣṭhira and calculated the time of Yudhiṣṭhira as 2448 BCE, which is 2526 years before 78 CE. Second interpretation is that Varāhamihira has defined Śaka era which is 2,526 years after Yudhiṣṭhira. Indian tradition places the time of Yudhiṣṭhira close to 3102 BCE, the traditionally accepted date of the beginning of Kaliyuga. This places the Śaka era specified by Varāhamihira in sixth century BCE. The question is which interpretation is correct?
Venkatachelam calculated that Varāhamihira used the Śaka era with zero point in 550 BCE and proposed that Cyrus the Great was the Śaka king after whom Varāhamihira has named his Śaka era [4]:
So the Śaka Era related in the Sloka is neither Vikrama nor Salivahana Era and this fact is approved by all the historians. That is the age of the Persian Emperor, Cyrus, which began in 550 B.C.
The difference between these two Śaka eras is 628 years. It is a long time period and astronomical observations reported by Varāhamihira can be used to decide which interpretation is correct.
2. Precession of the solstices
Varāhamihira has made the following astronomical observation in Bṛhat Saṃhitā about his time period [5]:
Currently Sun turns southward from the beginning of Karkaṭaka and turns other way from the beginning of Makara. If in the future there is deviation from this, then this should be ascertained by direct observation.
From the wordings of the verse, it is clear that Varāhamihira was using sidereal zodiac and not tropical zodiac. In a tropical zodiac, the statement will always be valid. To fix the time period of Varāhamihira, we need to fix the time when the Sun turned southward from the beginning of Karkaṭaka. Karka or Karkaṭaka is same as Cancer. The question then is — when did the Sun turn southward from the beginning of Karkaṭaka (Cancer)?
The answer lies in the phenomenon of the “Precession of the Equinoxes”, which is the wobbling of the earth’s axis. Due to precession, the position of sun among the background of the stars during equinoxes keeps changing. The Sun returns to the same position in about 26,000 years. As the zodiac has 12 signs, it takes approximately 2160 years to transit through one zodiac sign. The time when the Sun turned southward from the beginning of Karkaṭaka (Cancer) can be calculated by knowing the position of the summer solstice at some other time. Professor James B. Kaler of the University of Illinois has given the following date for the transition of the summer solstice from Gemini to Taurus [6]:
As a result of precession, around 1990 the Summer Solstice crossed the modern boundary from Gemini to Taurus, which now technically holds the point. Because the Summer Solstice is closer to the classic figure of Gemini than it is to that of Taurus, and since Gemini (along with Pisces, Libra, and Sagittarius) quarters the ecliptic, Gemini is still traditionally taken as the Solstice’s celestial home.
Since the Sun turned southward from the beginning of Gemini around 1990 CE and it takes about 2160 years to transit through one zodiac sign, we can calculate backwards and get the approximate dates for previous transitions as shown in Figure 1. Thus it was around 170 BCE that the Sun turned southward from the beginning of Karkaṭaka (Cancer). This matches well with the traditional date of Varāhamihira. Placing Varāhamihira in sixth century CE essentially means that the boundaries of sidereal Hindu and western zodiacs do not match and have a difference of about 10° as shown in Figure 2. It is currently believed that the concept of zodiac signs was borrowed by Hindus from Greeks. Then it begs the question as to why the boundaries do not match between Hindu and Western zodiac signs. In fact, the boundaries of sidereal Hindu and Western zodiac signs match very well in the Rohiṇī system as described in my previous articles [7, 8]. With the determination of rāśi boundaries and their correspondence with nakṣatra boundaries, precise dates of the position of summer solstice at rāśi and nakṣatra boundaries can be determined as shown in Figure 3.
Varāhamihira has also stated that the Sun changed its course from the middle of Āśleṣā earlier, but now that takes place in Punarvasu [9]. If we look at Figure 3, we find that the beginning of Cancer falls in Punarvasu (3/4 th from the beginning of Punarvasu), so Varāhamihira’s statements are consistent. From Figure 3, it is clear that the astronomical observation made by Varāhamihira took place around 140 BCE. Varāhamihira should be dated using the Cyrus Śaka era of 550 BCE. Varāhamihira wrote Pañchasiddhāntikā in 427 Śaka or 123 BCE. One major problem needs to be resolved before Varāhamihira could be dated to 2nd to 1st century BCE. This is the problem of Varāhamihira quoting Āryabhaṭa in Pañchasiddhāntikā [10].
3. Āryabhaṭa I or Āryabhaṭa II
Āryabhaṭa has given information about his birth in Āryabhaṭīya [11]. The information has been translated to mean that Āryabhaṭa was 23 years old in the year 3600 of the Kali era. Counting Kali era from the zero point in 3102 BCE, it is claimed that Āryabhaṭa wrote the book Āryabhaṭīya in 499 CE and was born in 476 CE. Varāhamihira could not have lived in 2nd to 1st century BCE, if he has quoted Āryabhaṭa who lived in 5th to 6th century CE. First of all, there is doubt whether Āryabhaṭa was born in 476 CE, 499 CE or 522 CE. Haridatta in 689 CE has interpreted the verse to mean that Āryabhaṭa was born in 499 CE and wrote Āryabhaṭīya in 522 CE, when he was 23 years old [12]. Commentator Someśvara (11th century CE) has interpreted the verse to mean that Āryabhaṭa was born 23 years after 3600 years of Kali era had passed [13].
Strange to say, commentator Someśvara understands the verse to mean that 3623 years had elapsed of the Kali Yuga at the birth of Āryabhaṭa.
If this interpretation is correct, then Varāhamihira could not have referred to the Āryabhaṭa of sixth century CE born after he wrote Pañchasiddhāntikā in 505 CE. Even if Āryabhaṭa wrote his famous book Āryabhaṭīya in 499 CE, it is unlikely that he would have been referred by Varāhamihira. Āryabhaṭa lived in Kusumpura, which modern historians identify with Patna in Bihar, while Varāhamihira wrote his treatise in far away Ujjain. It is unlikely that Āryabhaṭa would have become so famous in a mere six years to be quoted by Varāhamihira in an age 1500 years ago, when information travelled much more slowly and it took much longer to build one’s reputation. Varāhamihira was referring to an earlier Āryabhaṭa, and not the author of Āryabhaṭīya. It becomes clear from the two quotes by Al-Biruni (11th century):
In the book of Āryabhaṭa of Kusumapura we read that the mountain Meru is in Himavant, the cold zone, not higher than a yojana. In the translation, however, it has been rendered so as to express that it is not higher than Himavant by more than a yojana. This author is not identical with the elder Āryabhaṭa, but he belongs to his followers, for he quotes him and follows his example. I do not know which of these two namesakes is meant by Balabhadra. [14]
I have not been able to find anything of the books of Āryabhaṭa. All I know of him I know through the quotations from him given by Brahmagupta. The latter says in a treatise called Critical Research on the Basis of the Canons, that according to Āryabhaṭa the sum of the days of a caturyuga is 1377,917,500, i.e. 300 days less than according to Pulisa. Therefore Āryabhaṭa would give to a kalpa 1,590,540,840,000 days. According to Āryabhaṭa and Pulisa, the kalpa and caturyuga begin with midnight which follows after the day the beginning of which is the beginning of the kalpa, according to Brahmagupta. Āryabhaṭa of Kusumapura, who belongs to the school of the elder Āryabhaṭa, says in a small book of his on Al-ntf (?), that ‘1008 caturyugas are one day of Brahman. The first half of 504 caturyugas is called utsarpini, during which the sun is ascending, and the second half is called avasarpini, during which the sun is descending. The midst of this period is called sama, i.e. equality, for it is the midst of the day, and the two ends are called durtama (?).’ [15]
These two statements clearly show that there was another Āryabhaṭa before the Āryabhaṭa of Kusumapura born in 476 CE or 499 CE. Varāhamihira has referred to an earlier Āryabhaṭa about whom not much is known at this point. Also, Varāhamihira could not be contemporary of Āryabhaṭa of six century as that Āryabhaṭa had fixed the date of the beginning of Kaliyuga in 3102 BCE and thus Mahābharata war in 3138 BCE. Being his contemporary and quoting him, Varāhamihira could not have fixed the date of Mahābhārata war around 2448 BCE.
To put things in perspective, the date of the Varāhamihira has been brought forward by over six centuries based on calculating the date of Varāhamihira from Śaka era with zero point in 78 CE instead of the Cyrus Śaka era with zero point in 550 BCE. But why would Varāhamihira use an era based on the reign of a Persian emperor?
4. From Persia with love
Sometimes a name says a lot, and in the case of Varāhamihira it indeed does so. Varāhamihira is a combination of two words — “Varāha” and “Mihira”. Varāha meaning wild boar is an incarnation of Lord Viṣṇu. Mihira is a corrupted form of Mithra, an ancient Persian God equivalent to the Vedic God Mitra. As the word Mihira is of Persian origin, it points to Varāhamihira’s forefathers coming to India from Persia. Varāhamihira being called a “Śākadwīpī Brāhmaṇa” by commentator Bhaṭṭotpala. According to Agnipurāṇa, Śakadwīpa or island of Śakas is inhabited by Maga Brahmins, who are sun-worshippers [16]. Varāhamihira has instructed that idols of the Sun should be installed by Maga Brahmins [17]. Varāhamihira has also told us that he was the son of Ādityadāsa, born in Kapitthaka and living in Avanti [18]. As the kingdom of Avanti had its capital at Ujjayinī (Ujjain), Varāhamihira lived in the place from where the Emperor Vikramāditya ruled. Ujjain was also the most important place for astronomical learning in ancient India, and so it was natural for the most celebrated astronomer of his time to live there. His father’s name Ādityadāsa means servant of the Sun, and his own name has the Sun (Mihira) as part of it. This lends credence to the belief that he was from the family of Sun worshippers.
According to Indian tradition, Maga Brahimns came from Persia. The equivalent term Magi priests are well known from Persian history. The Magi were official priests of Achaemenid kings. The question then is why did the ancestors of Varāhamihira migrate to India? Throughout history, wars have been a major cause of migration. I consider the invasion of Persia by Alexander the Great as the most likely cause of this migration. We now have an explanation of why Varāhamihira would introduce the Śaka era instituted in the name of Cyrus the Great, ruler of Persia. Of all the kings that have been given the coveted title of “The Great”, I consider Cyrus the Great to be the most worthy of this title. Some kings have been given this title for being great conquerors, but I don’t consider the wanton pursuit of self-glory and bringing unwanted bloodshed of epic proportions to innocent people as signs of greatness. Here was a king who really cared about his people, and his subjects adored him. He is credited with instituting the first charter of human rights. When he conquered Babylon in 539 BCE, his first actions were to free the slaves and declare that everyone had the right to choose their religion. Cyrus succeeded to the throne in 559 BCE. He was not an independent ruler, and was subordinate to Media. In 550 BCE he conquered Media, declared himself an independent king, and founded the Achaemenid Empire. Here is a quote describing the timeline of ancient Persian empires [19]:
The Median Empire (728–550 BC) controlled the northern shore of the Persian Gulf and the Gulf of Oman, but did not extend west of the Tigris; the Achaemenid Empire (550–330 BC) included Mesopotamia and its access to the sea and the Parthian Empire (247 BC-224 AD) dominated the Arabian coast right up to Qatar.
We now know that the Śaka era referred to by Varāhamihira was instituted to celebrate the founding of the Achaemenid Empire. It is also of critical importance to know that Varāhamihira defines the era as that of the Śaka king, while the later Śaka era is invariably described as starting with the end of the Śakas. Varāhamihira’s Śaka king is a good king, while the Śaka king of Śālivāhana Śaka era is an enemy king who needed to be eliminated. We can work out the Cyrus Śaka era from the description given by Varāhamihira as follows.
The time of Yudhiṣṭhira was well established in Varāhamihira’s mind. As Yudhiṣṭhira participated in the Mahābhārata war and the Kali age followed shortly after the Mahābhārata war, the time of Yudhiṣṭhira will be close to 3102 BCE — the traditionally accepted date of the start of the Kali age. If we count 2526 years from 3102 BCE as Varāhamihira has specified, then we get 576 BCE as the date of Śaka era as defined by Varāhamihira. There is need for a correction here as follows. Yudhiṣṭhira is supposed to have lived for 25 years after the start of the Kali age and the era named after him, Yudhiṣṭhira era, starts from the date Yudhiṣṭhira left this world. Thus the Yudhiṣṭhira era starts from 3077 BCE, 25 years after the start of Kali era. If we count from this date for Yudhiṣṭhira, 2526 years from 3077 BCE comes to 551 BCE as the date of Śaka era as defined by Varāhamihira. This is within a year of 550 BCE and the difference can be due to different beginnings of the year. As Varāhamihira wrote Pañchasiddhāntikā in 427 Śaka, his time was 123 BCE instead of sixth century. This also makes him the senior contemporary of Emperor Vikramāditya in whose name the Vikrama era of 57 BCE was established. This Vikramāditya was of course different from Chandragupta II Vikramāditya of Imperial Gupta dynasty.
References
1. Pañchasiddhāntikā 1.8.
2. Bṛhat Saṃhitā 13.3.
3. Cunningham, A. (1883). Book of Indian Eras, with Tables for calculating Indian Dates. London, UK: Thacker, Spink and Co., page 9.
4. Venkatachelam, K. (1953). The plot in Indian Chronology. Ghandhinagara/Vijayawada, India: Bharata Charitra Bhaskara, page 50.
5. Bṛhat Saṃhitā 3.2.
6. http://stars.astro.illinois.edu/celsph.html.
7. Zero Points of Vedic Astronomy. Part 2 of 8 — A Tale of two Yogatārās | by Dr. Raja Ram Mohan Roy | Jan, 2021 | Medium.
8. Zero Points of Vedic Astronomy. Part 3 of 8 — The Clock in the Sky | by Dr. Raja Ram Mohan Roy | Jan, 2021 | Medium.
9. Pañchasiddhāntikā 3.20–22.
10. Pañchasiddhāntikā 15.20.
11. Āryabhaṭīya, Kālakriyāpāda, Verse 10.
12. Sarma, K.V. (2001). Āryabhaṭa: His name, time and provenance. Indian Journal of History of Science, 36(3–4): 105–115.
13. Dāji, B. (1865). Brief notes on the age and authenticity of the work of Āryabhaṭa, Varāhamihira, Brahmagupta, Bhaṭṭotpala, and Bhāskarāchārya. Journal of the Royal Asiatic Society of Great Britain & Ireland, New Series, Volume the First: 392–418. Quote on page 406.
14. Sachau, E. C. (1910). Alberuni’s India. Vol. 1. London, UK: Kegan Paul, Trench, Trubner & Co. Ltd., page 246.
15. Sachau (1910): 370–371.
16. Agnipurāṇa 119.15–22.
17. Bṛhat Saṃhitā 60.19.
18. Bṛhat Jataka 28.9.
19. Cadene, P. and Dumortier, B. (2013). Atlas of the Gulf States. Boston, Massachusetts, USA: Brill, page 10.
More about the author
I am a seeker in search of the true history and heritage of India. I have strong scientific background (B.Tech. in Metallurgical Engineering from Indian Institute of Technology, Kanpur and Ph.D. in Materials Science and Engineering from The Ohio State University, USA) and a deep interest in ancient Indian texts. My work on Indology spans three different fields: cosmology, astronomy, and history.
Email: rajarammohanroy108@gmail.com
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Astonishing Contributions of Varahamihira to Ancient Astronomy
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Varahamihira, an esteemed figure in the annals of Indian astronomy, was a polymath who made indelible contributions .
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Varahamihira, an esteemed figure in the annals of Indian astronomy, was a polymath who made indelible contributions to the field during the classical period of Indian history, predominantly in the 6th century. His full name, Varāhamihira, suggests an astronomical connotation—”Varāha” denotes a celestial space, and “Mihira” translates to “sun”. Born in the Avanti region, which corresponds to modern-day Ujjain, his intellectual pursuits were not confined to astronomy alone; he was also a mathematician, astrologer, and philosopher.
His magnum opus, the “Pancha-Siddhantika,” is a celebrated work encapsulating the five major treatises on astronomy, belying a confluence of Greek, Egyptian, Roman, and Indian astronomical thought.
Another notable work, the “Brihat Samhita,” is a comprehensive compilation on astrology that provides insights into subjects ranging from meteorology to architecture.
Varahamihira’s erudition earned him a place alongside the renowned Nine Gems—esteemed scholars—at the court of King Vikramaditya in Ujjain.
Varahamihira‘s significance extends beyond the boundaries of the written word. His works contributed to the thriving scientific and mathematical discourse of the time, influencing future generations of scholars throughout the subcontinent and beyond. His legacy is a testament to the grandeur of ancient India’s intellectual capability and provides insights into the sophistication of pre-modern scientific methodologies. The respect he commands in India is such that an observatory was named in his honor—the Varahamihira Observatory of Ujjain. Through the continued study of his texts, Varahamihira’s legacy endures, underscoring the historical underpinnings of contemporary astronomy and astrological practices.
The “Pancha-Siddhantika” (meaning “The Five Canons”) is a significant treatise in the field of Indian astronomy, composed by the illustrious mathematician and astronomer Varahamihira in the 6th century CE. This seminal work is renowned for its synopsis of five major astronomical canons that were considered authoritative in Varahamihira’s time. The text serves as a comprehensive summary and critical examination of these canons, incorporating elements from various schools of astronomy that flourished before him.
Varahamihira’s synthesis offered insights into the astronomical knowledge of ancient India, and it included the following five siddhantas:
Surya Siddhanta: Likely the most famous and respected treatise, it presented a sophisticated system of astronomy, including rules for calculating the motions of various celestial bodies.
Vasishtha Siddhanta: Attributed to the sage Vasishtha, it is one of the oldest astronomical systems and is noted for its unique approach to astronomical measurements.
Paulisha Siddhanta: Believed to be based on Hellenistic astronomy, this siddhanta demonstrated considerable Greek influence in the astronomical traditions of India.
Romaka Siddhanta: Often associated with Roman origins, this influenced later Indian astronomers, especially in their understanding of the Moon’s motion.
Paitamaha Siddhanta: This school of thought draws from the earlier body of work attributed to the sage Pitamaha and formed a part of the traditional Vedic astronomical canon.
In “Pancha-Siddhantika”, Varahamihira not only compiled the essential elements of these texts but also critically evaluated their mathematical methods to improve the accuracy of astronomical predictions. He calibrated the Indian astronomical calculations to more closely align with actual celestial positions, ensuring the practical application of this work in calendrical computations and astrological predictions. The treatise stands as a testament to Varahamihira’s scholarly approach and the syncretic nature of Indian astronomical science, which integrated native and foreign influences to create a more advanced understanding of the cosmos.
Varahamihira’s treatises present significant innovations in the field of trigonometry, vital for computational astronomy. He ingeniously advanced the understanding of trigonometric functions, which facilitated more precise astronomical predictions and laid a robust foundation for future astronomers to build upon.
Introduction of the Sine Function: Varahamihira was instrumental in formulating early concepts of the sine (jya) function. His work contributed to the calculation of celestial bodies’ positions by accurately determining the amplitude of the sine wave in trigonometric equations.
Tabulation of Sine Values: Going further, Varahamihira’s efforts led to the tabulation of sine values for different angles. This paved the way for their swift application in astronomical calculations and solving various astronomical problems with heightened accuracy.
Refinement of Interpolation Techniques: He refined interpolation methods to estimate values within this sine table. This process was crucial for astronomers when dealing with non-standard angles which did not have readily available sine values.
Formulation of Half-Angle Formulas: Another significant contribution was his formulation of half-angle formulas. These relationships were particularly beneficial in calculating the astronomical phenomena occurring at half-degree increments.
Application in Eclipse Predictions: The improved trigonometric methods pioneered by Varahamihira were applied extensively in predicting lunar and solar eclipses. His approach increased the precision with which astronomers could determine the timings and durations of these events.
The trigonometric advancements made by Varahamihira were vital for the astronomical applications of his era and influenced the trajectory of mathematical and astronomical studies. His work reflected an important nexus between theoretical mathematics and practical observational astronomy, helping to shape the contours of ancient Indian celestial knowledge.
Varahamihira, an eminent astrologer and astronomer, made invaluable strides in the field of predictive astrology during the 6th century. His magnum opus, the “Brihat Samhita,” is an extensive treatise exploring various aspects of astrology and its implications. This work delves into the predictive techniques based on planetary motions and their relationships, which were ahead of his time and have greatly influenced subsequent generations.
Within his analysis:
Varahamihira explored the significance of planetary transits, known as “Gochara,” and their effects on human affairs. By observing the movements of planets through the zodiac signs, he could predict auspicious and inauspicious events with considerable accuracy.
He also made significant contributions to the concept of “Yogas,” which are specific planetary combinations that yield various results, both fortuitous and challenging. Varahamihira described numerous such Yogas and offered detailed interpretations of their influence on an individual’s life path.
His work in “Hora,” the division of time to determine the most favorable moments for undertaking different activities, was groundbreaking. By calculating the positions of celestial bodies, Varahamihira could determine the quality of time and thereby suggest optimal moments for initiating various endeavors.
Varahamihira’s predictive methods were not limited to personal horoscopes but also extended to more extensive forecasts for cities, nations, and weather patterns. This comprehensive approach underscored his belief in the interconnectedness of cosmic and terrestrial events, a perspective that set the grounds for future advancements in astrology.
His rigorous methodologies, systematic analyses, and the empirical nature of his studies distinguish his contributions and emphasize the role of observation and calculation in astrology. Varahamihira’s role as a bridge between scientific observation and astrological prediction is a testament to his deep understanding of the complexities within the celestial sphere. The precision of his predictive techniques remains influential in the astrological community to this day.
The Brihat Samhita, authored by Varahamihira in the 6th century CE, stands as a colossal work in the realm of ancient Indian astronomy. This compendium encompasses a wide array of subjects, ranging from astrology and planetary movements to weather forecasts and earthquake predictions, amalgamating the philosophical with the empirical. One cannot help but marvel at the sheer breadth of content and the scientific approach that permeates through this encyclopedic masterpiece.
Structured into 106 chapters, the treatise delves into various aspects of celestial phenomena, including:
Detailed descriptions of planets, their characteristics, and their impact on daily life.
Comprehensive guidelines concerning the lunar and solar eclipses, their calculations, and the significance attached to these celestial events.
Insightful observations on the rising and setting of planets, and their conjunctions with stars.
Innovative methods for forecasting weather patterns and recognizing omens offered by natural occurrences.
Varahamihira’s work reflects a blend of observational rigour and mathematical precision, indicating a highly developed scientific culture during his times. His writings suggest a remarkable trust in empirical observations, and he implores future scholars to uphold the empirical approach in their astronomical studies. His injunctions underpin the fact that astronomy was not a static field but a dynamic science open to refinement with new observations.
What truly distinguishes the Brihat Samhita is not just its scientific content but also its holistic approach to understanding the universe. Varahamihira integrated the principles of astrology with practical sciences, recognizing the interconnectedness of celestial and terrestrial phenomena. Thus, the Brihat Samhita remains an enduring testament to Varahamihira’s astronomical genius and continues to be a seminal reference for scholars interested in the history of science.
Varahamihira’s advancements in astronomy significantly contributed to the reform of the calendar and timekeeping in ancient India. His works, particularly the “Pancha-Siddhantika” and the “Brihat Samhita,” laid the foundations for precise calculations of time that were critical for various aspects of daily life, agriculture, and religious ceremonies. Here are key aspects of Varahamihira’s contribution:
He synthesized pre-existing calendrical knowledge from five earlier astronomical systems, hence the name Pancha-Siddhantika, or “Five Astronomical Canons”. This work facilitated a unified approach to time reckoning and calendar construction.
Varahamihira improved the accuracy of the lunar calendar by addressing the calculation of the moon’s motion. His corrections to lunar and solar eclipses predictions were particularly significant for the calendar since these events were traditionally used to mark time.
His adaptation of the Metonic cycle, a nineteen-year cycle after which the lunar phases recur on the same days of the solar year, was important in reconciling the lunar calendar with the solar year.
He also introduced important corrections to the calculation of the solstices and equinoxes, events that were essential to maintaining the accuracy of the solar calendar over long periods.
In “Brihat Samhita,” Varahamihira included comprehensive guidelines for the interpretation of celestial phenomena, which provided insights into seasonal changes — critical information for agricultural planning and ensuring the calendar remained aligned with the seasons.
Varahamihira’s devotion to enhancing the precision of timekeeping and calendar systems was an incredible feat that fortified the infrastructure of time measurement for his contemporaries and for generations to come. His work echoed through the ages, influencing both the scientific and cultural dimensions of timekeeping in India.
In the realm of ancient astronomy, one of the profound contributions of Varahamihira was his exploration of the concept of ‘Svamsa’—a principle within Vedic astrology. Specifically, ‘Svamsa’ refers to the twenty-seventh division of the Moon’s path around the Earth. This is closely tied to the system known as ‘Nakshatras’ or lunar mansions, which maps the Moon’s transit against the backdrop of fixed stars.
Varahamihira elucidated that the position of planets within these divisions plays a critical role in determining their astrological influence. The implication of this finding is vast; it suggests that not only the presence of a planet in a zodiac sign is important, but also its placement within these finer partitions or ‘Svamsas’.
To contextualize the importance of ‘Svamsa’:
It adds a layer of depth to horoscopic readings, allowing astrologers to make more nuanced predictions.
Each ‘Svamsa’ corresponds to a specific energy or influence, contributing unique traits to an individual’s personality or destiny when a planet is positioned within it.
The ‘Svamsa’ system also parallels with the idea of ‘Vargas’ or divisional charts, which are used to examine various life areas in a person’s astrological profile.
Varahamihira’s work in integrating the concept of ‘Svamsa’ into the broader framework of astrology was a leap forward for the field. It underscored the subtle ways in which celestial bodies could impact terrestrial events and human lives, reinforcing the complexity of the cosmos and its influence on earthly affairs. The precision with which he approached planetary influence was not just astronomical but also deeply astrological, imbuing each planet’s position with specific meaning and significance.
Varahamihira, the renowned Indian astronomer, mathematician, and astrologer of the 6th century, has left a monumental legacy that has significantly influenced numerous fields of study. His contributions resonated through the ages, impacting future generations of scientists and astrologers in several distinct ways.
He compiled and improved upon the astronomical knowledge of his time in his five works, collectively known as the Pancha-Siddhantika. These works became essential references for future astronomers in both the Indian subcontinent and the Islamic world. His methods for eclipse calculation and planetary positions were later refined and built upon by subsequent astronomers.
Varahamihira’s text, Brihat Samhita, is a comprehensive treatise on astrology, which included meteorological forecasts, earthquake predictions, and an array of other topics. Astrologers have drawn upon this text for centuries, establishing many of his astrological principles as staples in Vedic astrology that are still in practice today.
His advocacy for incorporating observations and mathematics into astrology helped bridge the divide between empirical science and the mystical aspects of astrological practices. This idea encouraged a more systematic and empirical approach to astrology that informed future methodologies.
The Varahamihira school of astronomy, with its rich set of commentaries and students, preserved his scientific spirit, ensuring that his methodologies were analyzed and taught to future scholars. This helped maintain a lineage of knowledge that was crucial for the survival and growth of astronomical study in the region.
Varahamihira’s interdisciplinary approach, which encompassed a range of subjects from hydrology to architecture within his astrological and astronomical works, inspired future scientists to adopt a more holistic view of research and exploration.
Moreover, his contributions to trigonometry, notably the sine table, and his interest in improving calendrical calculations, have had lasting implications for the field of mathematics, influencing the work of later mathematicians and scientists like Bhaskaracharya and Brahmagupta.
By stitching together observations, mathematical rigor, and astrological analysis, Varahamihira set a precedent for integrative thinking that not only advanced the science of his time but also laid a foundation for future explorations in astronomy and astrology.
Varahamihira, the esteemed Indian astronomer, astrologer, and mathematician of the 6th century, made significant contributions that deeply influenced subsequent scientific endeavors in the Arab world. The translation and transmission of his works catalyzed a flow of knowledge that would blend with local intellectual pursuits and enhance the cultural and scientific tapestry of the time.
His encyclopedic work, the “Panchasiddhantika” (The Five Astronomical Canons), provided a comprehensive summary of the then-existing knowledge of astronomy. It included advances in the calculation of celestial bodies’ positions, which attracted the interest of Arab scholars.
The Arabs, during their Golden Age of science, translated several of Varahamihira’s texts into Arabic, notably during the reign of the Abbasid Caliph Al-Mansur and his successors. They were drawn not only to his original work but also to the compilations and commentaries encompassing earlier Hellenistic, Persian, and Indian astronomical traditions that Varahamihira himself had mastered.
One of Varahamihira’s other noted works, “Brihat Samhita,” serves as an exemplary guide to various subjects, including astrology, architecture, and agriculture. This treatise reached the Arab world where it was consulted for its profound astrological content and pragmatic applications.
The Arabs respected Varahamihira’s methods for their scientific rigor and incorporated them into their own astronomical and mathematical systems. Eventually, this translated knowledge became foundational in the development of Arab astronomy, which was instrumental to the later European Renaissance.
The intellectual exchange between ancient India and the Arab civilization demonstrates the importance of cross-cultural interactions in the progression of global knowledge. Varahamihira’s legacy is a testament to the enduring impact that one region’s scholarship can have on the world stage, enriching and advancing the collective understanding of the cosmos.
Varahamihira’s multifaceted contributions have left a lasting legacy in the realms of astronomy and astrology. His scholarly works, particularly the Pancha-Siddhantika and the Brihat Samhita, reflect his profound understanding of celestial phenomena and their influence on terrestrial life. Not only did his writings preserve the astronomical knowledge of ancient times, but they also enhanced it by blending Greek, Persian, and Indian observations.
His classifications and predictions contributed to refining astrological practices.
Varahamihira’s astronomical tables have proven invaluable for subsequent generations.
His insights on planetary movements retain relevance in the field of astronomy.
Moreover, Varahamihira’s contributions extended beyond the theoretical. He initiated systems for weather prediction and emphasized the importance of astronomical study for societal benefit. Astonishingly, his methods are echoed in today’s approaches to understanding and utilizing astronomical information.
The depth of Varahamihira’s work has ensured that he remains a respected source of wisdom. Modern scholars and enthusiasts often refer to his texts, highlighting the enduring resonance of his contributions. His name is regularly referenced in academic discussions about the history of astronomy and astrology.
In essence, Varahamihira has achieved a form of immortality through his work. The practical applications derived from his writings, as well as the foundational theories he presented, continue to influence current thought and practices in both astronomy and astrology. His intellectual prowess has guaranteed him a permanent place in the pantheon of historical figures who shaped our understanding of the cosmos.
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Varahamihira – Sage Who Predicted Water Discovery On Mars 1500 Years Ago
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Even thousands of years before, India had become famous and reached its pinnacle in astrological and astronomical sciences. Ancient Astrological works had been translated into many foreign languages.
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https://static.licdn.com/aero-v1/sc/h/al2o9zrvru7aqj8e1x2rzsrca
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https://www.linkedin.com/pulse/varahamihira-sage-who-predicted-water-discovery-mars-1500-solution
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Even thousands of years before, India had become famous and reached its pinnacle in astrological and astronomical sciences. Ancient Astrological works had been translated into many foreign languages. Ibn Batuta and Al Baruni were two prominent Arab travellers who had visited ancient India specially to pursue Astrology.
By their translations they had induced German scholars to come to India to study Astrology and Vedic literature. Varahamihira was one of the only renowned Indian Astronomer, Mathematician and Astrologer whose name became a household word throughout India and it is said his near contemporaries Aryabhata and Brahmagupta even did not match with the popularity of Varahamihira.
Varahamihira was born in 505 A.D. into a family of Brahmins settled at Kapittha, a village near Ujjain. His father, Adityadasa was a worshipper of the Sun god and it was he who taught Varahamihira astrology. On a visit to Kusumapura (Patna) young Varahamihira met the great astronomer and mathematician, Aryabhata. The meeting inspired him so much the he decided to take up astrology and astronomy as a lifetime pursuit.
At that time, Ujjain was the centre of learning, where many schools of arts, science and culture were flourishing in the prosperity of the Gupta reign. Varahamihira, therefore, shifted to this city, where scholars from distant lands were gathering. In due course, his astrological skills came to the notice of King Yashodharman Vikramaditya of Malwa, who made him one of the Nine Gems of his court.
Varahamihira was learned in the Vedas, but he was not a blind believer in the supernatural. He was a scientist. Like Aryabhata before him, he declared that the earth was spherical.
In the history of science he was the first to claim that some “force” might be keeping bodies stuck to the round earth. The force is now called gravity. He proposed that the Moon and planets are lustrous not because of their own light but due to sunlight.
Varahamihira’s main work is the book Pancha Siddhantika (Treatise on the five Astronomical Canons gives us information about older Indian texts which are now lost). The work it seems is a treatise on mathematical astronomy and it summarises five earlier astronomical treatises, namely, the Surya Siddhanta, Romaka Siddhanta, Paulisa Siddhanta, Vasishtha Siddhanta and Paitama Siddhanta.
It is acclaimed that Pancha Siddhantika of Varahamihira is one of the most important sources for the history of Hindu Astronomy from before the time of Aryabhata.
Another important contribution of Varahamihira is the encyclopaedic Brihat-Samhita. It covers wide ranging subjects of human interest, including astrology, planetary movements, eclipses, rainfall, rainfall, clouds even domestic relations, gems, pearls and rituals.
Varahamihira in 550 AD have described a large number of comets in the Brhat Samhita. He wrote over sixty couplets about comets. He did not have the modern facilities like Telescope or other electronic equipment. He says that sages Garga, Parasara, Asita, Devala and others had already written about the comets.
He was also an astrologer and has written on all the three branches of astrology. His son Prithuyasas has also contributed in the Hindu astrology through his work, Hora Sara.
Varahamihira’s mathematical work included the discovery of the trigonometric formulas. He improved the accuracy of the sine tables of Aryabhata l. He defined the algebraic properties of zero as well as of negative numbers. Furthermore, He was among the first mathematicians to discover a version of what is now known as the Pascal’s triangle. He used it to calculate the binomial coefficients.
Varahamihira made some significant observations in the field of ecology, hydrology and geology too. He was the first person who predicted underground water. His claim that plants and termites serve as indicators of underground water is now receiving attention in the scientific world.
Varahamihira, without any scientific equipment, derived the true value of equinox. This value is very important for the modern day Geostationary Satellites.
Surya Siddhanta & description on planet Mars:
Pancha siddhantika includes Surya Siddhanta, an astronomical treatise which explains or determines the true motions of the luminaries. Under this work, Varahamihira has also explained the estimated diameters of the planets, like Mercury, Venus, Mars, Saturn and Jupiter.
The book gave the locations of several stars other than the lunar nakshatras (constellations) and the calculation of solar eclipses. The book also had a significant coverage on kinds of time, the length of the year of gods and demons, day and night of god Brahma, the elapsed period since creation, how planets move eastwards and sidereal revolution.
Surya Siddhanta mentioned the Mars’s diameter (which was calculated to be 3,772 miles that has an error within 11% of the currently accepted diameter of 4,218 miles), circumference and also carries calculations on and about solar eclipses and lunar eclipses, its color and portion of the moon as well.
Apart from these, Varahamihira also predicted the presence of water on Mars. The book had a detailed description of planet Mars. He had said in his book that planet Mars has both water and iron present on its surface, which have now been revealed by NASA and ISRO.
He was the first to mention and explain how each planet in the solar system has been created by and centered on the sun.
It’s intriguing to know that during NASA’s Mars mission, Arun Upadhyay, a retired IPS, did a comparative study of Varāhamihira’s calculations about Mars and found certain similarities.
Though the original book of Surya Siddhanta till date remains untraced, but somehow a few scholars had taken their notes for their own research work. Many fear that the original version was stolen by the other astronomers from overseas. The present version of Surya Siddhanta, which is often used by Panchang experts to predict festive dates and nakshatras, was modified by Bhaskaracharya during the Middle Ages.
It is learnt, Varahamihira humbly said about his own treatises: “The science of Astrology is a vast ocean and is not easy for everyone to cross it. My treatises provide a safe boat.” Truly, even now they are acknowledged as masterpieces.
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layout: person nodeid: bookofproofs$Varahamihira categories: history,early-middle-ages parentid: bookofproofs$608 tags: ancient-indian,astronomy,origin-india orderid: 505 title: Varahamihira born: 505 died: 587 keywords: varahamihira,varahamihira description: Varahamihira was an Indian astrologer whose main work was a treatise on mathematical astronomy which summarised earlier astronomical treatises. He discovered a version of Pascal's triangle and worked on magic squares. references: bookofproofs$6909 contributors: @J-J-O'Connor,@E-F-Robertson,bookofproofs
Varahamihira was an Indian astrologer whose main work was a treatise on mathematical astronomy which summarised earlier astronomical treatises. He discovered a version of Pascal's triangle and worked on magic squares.
Mathematical Profile (Excerpt):
The school of mathematics at Ujjain was increased in importance due to Varahamihira working there and it continued for a long period to be one of the two leading mathematical centres in India, in particular having Brahmagupta as its next major figure.
The most famous work by Varahamihira is the Pancasiddhantika (The Five Astronomical Canons) dated 575 AD.
One treatise which Varahamihira summarises was the Romaka-Siddhanta which itself was based on the epicycle theory of the motions of the Sun and the Moon given by the Greeks in the 1st century AD.
Other works which Varahamihira summarises are also based on the Greek epicycle theory of the motions of the heavenly bodies.
There is, however, quite a debate about interpreting data from Varahamihira's astronomical texts and from other similar works.
Varahamihira made some important mathematical discoveries.
In particular he examines a pandiagonal magic square of order four which occurs in Varahamihira's work.
Born 505, Kapitthaka, India. Died 587, India.
View full biography at MacTutor
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Varahamihira was an Indian astrologer whose main work was a treatise on mathematical astronomy which summarised earlier astronomical treatises. He discovered a version of Pascal's triangle and worked on magic squares.
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Maths History
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Our knowledge of Varahamihira is very limited indeed. According to one of his works, he was educated in Kapitthaka. However, far from settling the question this only gives rise to discussions of possible interpretations of where this place was. Dhavale in [3] discusses this problem. We do not know whether he was born in Kapitthaka, wherever that may be, although we have given this as the most likely guess. We do know, however, that he worked at Ujjain which had been an important centre for mathematics since around 400 AD. The school of mathematics at Ujjain was increased in importance due to Varahamihira working there and it continued for a long period to be one of the two leading mathematical centres in India, in particular having Brahmagupta as its next major figure.
The most famous work by Varahamihira is the Pancasiddhantika (The Five Astronomical Canons) dated 575 AD. This work is important in itself and also in giving us information about older Indian texts which are now lost. The work is a treatise on mathematical astronomy and it summarises five earlier astronomical treatises, namely the Surya, Romaka, Paulisa, Vasistha and Paitamaha siddhantas. Shukla states in [11]:-
The Pancasiddhantika of Varahamihira is one of the most important sources for the history of Hindu astronomy before the time of Aryabhata I I.
One treatise which Varahamihira summarises was the Romaka-Siddhanta which itself was based on the epicycle theory of the motions of the Sun and the Moon given by the Greeks in the 1st century AD. The Romaka-Siddhanta was based on the tropical year of Hipparchus and on the Metonic cycle of 19 years. Other works which Varahamihira summarises are also based on the Greek epicycle theory of the motions of the heavenly bodies. He revised the calendar by updating these earlier works to take into account precession since they were written. The Pancasiddhantika also contains many examples of the use of a place-value number system.
There is, however, quite a debate about interpreting data from Varahamihira's astronomical texts and from other similar works. Some believe that the astronomical theories are Babylonian in origin, while others argue that the Indians refined the Babylonian models by making observations of their own. Much needs to be done in this area to clarify some of these interesting theories.
In [1] Ifrah notes that Varahamihira was one of the most famous astrologers in Indian history. His work Brihatsamhita (The Great Compilation) discusses topics such as [1]:-
... descriptions of heavenly bodies, their movements and conjunctions, meteorological phenomena, indications of the omens these movements, conjunctions and phenomena represent, what action to take and operations to accomplish, sign to look for in humans, animals, precious stones, etc.
Varahamihira made some important mathematical discoveries. Among these are certain trigonometric formulae which translated into our present day notation correspond to
sinâ¡x=cosâ¡(Ï2âx)\sin x = \cos(\large\frac{\pi}{2}\normalsize - x)sinx=cos(2Ïââx),
sinâ¡2x+cosâ¡2x=1\sin^{2}x + \cos^{2}x = 1sin2x+cos2x=1, and
12(1âcosâ¡2x)=sinâ¡2x\large\frac{1}{2}\normalsize (1 - \cos 2x) = \sin^{2}x21â(1âcos2x)=sin2x.
Another important contribution to trigonometry was his sine tables where he improved those of Aryabhata I giving more accurate values. It should be emphasised that accuracy was very important for these Indian mathematicians since they were computing sine tables for applications to astronomy and astrology. This motivated much of the improved accuracy they achieved by developing new interpolation methods.
The Jaina school of mathematics investigated rules for computing the number of ways in which rrr objects can be selected from nnn objects over the course of many hundreds of years. They gave rules to compute the binomial coefficients nCr_{n}C_{r}nâCrâ which amount to
nCr=1r!n(nâ1)(nâ2)...(nâr+1)_{n}C_{r} = \large\frac{1}{r!}\normalsize n(n-1)(n-2)...(n-r+1)nâCrâ=r!1ân(nâ1)(nâ2)...(nâr+1)
However, Varahamihira attacked the problem of computing nCr_{n}C_{r}nâCrâ in a rather different way. He wrote the numbers nnn in a column with n=1n = 1n=1 at the bottom. He then put the numbers rrr in rows with r=1r = 1r=1 at the left-hand side. Starting at the bottom left side of the array which corresponds to the values n=1,r=1n = 1, r = 1n=1,r=1, the values of nCr_{n}C_{r}nâCrâ are found by summing two entries, namely the one directly below the (n,r)(n, r)(n,r) position and the one immediately to the left of it. Of course this table is none other than Pascal's triangle for finding the binomial coefficients despite being viewed from a different angle from the way we build it up today. Full details of this work by Varahamihira is given in [5].
Hayashi, in [6], examines Varahamihira's work on magic squares. In particular he examines a pandiagonal magic square of order four which occurs in Varahamihira's work.
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Brhat Samhita of Varahamihira (2 Volumes)
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This work is an encyclopaedia of astrological and other subjects of human interest. Whatever subjects the author takes up for delineation, whether it is eclipse, planetary movements, rainfall, cloud, architecture, water-divination or some other topic he discusses the same with thoroughness and mastery based on the know
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https://www.mlbd.in/products/brhat-samhita-of-varahamihira-2-volumes-m-ramakrishna-bhat-9789390064557-9390064554
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This work is an encyclopaedia of astrological and other subjects of human interest. Whatever subjects the author takes up for delineation, whether it is eclipse, planetary movements, rainfall, cloud, architecture, water-divination or some other topic he discusses the same with thoroughness and mastery based on the knowledge of ancient sastras.
Review(s)
About the Author(s)
PROF. M.R. BHAT was a well known Samskrta scholar, teacher, poet and astrologer, who retired in 1974 as the Head of Sanskrit Department of Hindu College, Delhi University. He had served the cause of Samskrta learning and Indian culture for more than half a century. Prof. Bhat edited with translation classical works like the Brhat Samhita of Varahamihira (2 Volumes), Horasarah of Prthuyasas, Prasnajnanam of Bhattotpala. Author of Fundamentals of Astrology. Prof. Bhat had revised the translation of Uttara-kalamrtam, and Phaladipika. He was the founder-editor of the Sanskrit _English Journal Amrtavani and had contributed a large number of articles on oriental learning and culture of various journals and periodicals. In recognition of his erudition and devotion to oriental learning and culture Prof, Bhat was conferred the titles Vidyabhaskara, Vidyasagara and Kavitacatura. Prof. Bhat died in 1990.
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Varahamihira, also known as Varaha or Mihira, was a philosopher, astronomer & mathematician from India who lived in the first half of the sixth century. Know more
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