Russian ruble was world’s hardest currency in late 19th century

The gold ruble was introduced in Russia by decree of Russian Emperor Nicholas II on January 15, 1897. Russia’s new gold coins – the imperial (worth 15 rubles from 1897 to 1917) and the half-imperial became freely convertible to any foreign currencies. It is noteworthy that that such a radical economic reform did not bring about any significant social disturbances. In fact, the reform put the Russian ruble on a Top Five list of the world’s hardest currencies.

Inflation was a serious problem in Russia for nearly 30 years in the early 19th century. The war against Napoleon I of France took a heavy toll in the Russian economy. The government attempted to resolve numerous financial and economic problems through usual methods. The government borrowed heavily from foreign banks and issued a great deal of “empty” money i.e. banknotes. The policy had been much in use since the reign of Catherine II. However, the measures largely backfired by the mid-19th century. Mikhail Saltykov-Shchedrin, a prominent Russian novelist of the 19th century, remarked caustically on the situation in one of his works: “At best, you could get half a ruble for the ruble. You might as well get a punch in the face for it.”

Russian Finance Minister Yegor Kankrin carried out a financial reform in 1839-1943 in order to head off a crisis in the wings. The steps helped improve the situation to a certain extent. The silver ruble became a basic currency unit. The old paper money, which looked rather nondescript, was superseded by a new banknote featuring the state emblem and anti-counterfeit marks. The government opted to pursue a traditional policy aimed at boosting fiscal revenues at the expense of the population: numerous excise duties were imposed on the basic consumer goods e.g. kerosene, tobacco, tea, coffee, and matches. Besides, Russia’s increased grain exports contributed to the accumulation of golden reserves. Russia got a surplus budget as a result of the reform. However, the Russian ruble became fully convertible only under Sergei Witte, who was appointed Finance Minister in 1892.

The Crimean War (1853-1856) was quite a misfortune for Russia. The war led to an increase in the issue of paper money. The war expenses amounted to 528 million rubles, a huge sum at the time. The government had to fill the state coffers mostly by printing more money since foreign loans were hard to get following the defeats on the battlefield. Besides, in 1860 the cabinet of Alexander II started to step up the minting of silver coin series of 20, 15, 10 and 5 kopeks of a lower standard (the so-called 72 purity). The silver standard of the coins was decreased even lower to the 48 purity in 1867. As a result, inflation rate soared. Russia had to introduce a secure precious metal equivalent for its monetary system. Sergei Witte, who took over the Ministry of Finance in 1892, suggested that the ruble be linked to a gold standard.

Historian Alexander Polunov stresses that Witte was a man of ‘great idea’ just like some other reformers. “Witte was unscrupulousintakingadvantageofanymeansavailabletomakethings happen his way. He was no stranger to playing a game concocted of brinkmanship, bribes, rumors and allegations published in the press. At the end of the day, the czar was the only one who called the tune in Russia. Witte was smart enough to explore that peculiarity of the Russian political system to the full. Having gained support of Nicholas II, he actually “pushed” his reforms through the cabinet with the help of the decrees issued in the name of the Emperor.” Pursuant to one of the decrees issued on January 15, 1897, the state mint was to begin producing gold rubles or gold imperials and half-imperials bearing face value.

Basically, the Witte monetary reform implied the exchange of banknotes for gold coins at face value i.e. one ruble was to be exchanged for one ruble.

However, the ruble’s fixed weight of gold of a stated fineness was lowered by one third. The gold ruble, Russia’s standard unit of currency, introduced in 1897 was equal to 0.774235 grams of gold. The new banknotes of 500, 100, 50, 25, 10, 5, 3, and 1 ruble in value were to be exchanged for gold in any quantity. The reform also included devaluation of the ruble to fix a new value of coins held over from the previous period. The worth of the imperial was set at 15 rubles, while the half-imperial was worth 7.5 rubles. Eventually, the Russian ruble became the world’s hardest currency.

The monetary reform implemented in Russia under the leadership of Finance Minister Sergei Witte is considered a very successful step which did not cause any undesirable social aftereffects. Speaking to members of the State Council on March 14, 1894, Witte stressed the importance of a monetary reform he was about to launch: “The reform should be carried out without causing any disturbance or any artificial changes of the existing conditions for it is the monetary system on which all the appreciation, all property and labor interests of the population rest. The planned reform should bring out the transition of our motherland from the paper monetary circulation to the circulation of gold coin and its appropriate exchange units. The paper monetary circulation lacks a proper legal framework; it is as harmful in terms of economy as it is dangerous in terms of the political repercussions for the country.”

Upon the completion of the monetary reform, paper rubles were exchanged for gold ones without any difficulties in the State Bank of the Russian Empire. Sergei Witte managed to ensure that the issue of banknotes was in line with commodity stocks and gold reserves. Even the Russo-Japanese war of 1904-1905 and the revolutionary turmoil that followed in 1905-1907 had no impact on the stability of the Russian currency. Unfortunately, Sergei Witte, dubbed the “father of the gold ruble” by some historians, was unable to see through his reform program because he was discharged from office in 1905.

World War I dealt a major and devastating blow to the Russian economy. The exchange of banknotes for gold was canceled shortly after the war broke out. The Russian ruble ceased to be a convertible currency before long.


Translated by Guerman Grachev

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Author`s name Dmitry Sudakov