Russian Ruble To Become Hard Currency?

President Putin says, the national GDP should double in ten years

In the message to the Federal Assembly, Vladimir Putin said that there was a need to make the Russian ruble a hard currency and to double the Russian GDP during the coming ten years. Experts have already calculated that the national economy would have to develop in great strides according to the presidential plan to gain up to 7.2 percent every year. Such a perspective seems to be either a bluff or a serious determination of the state to interfere in the national economy. Although, one has to mention that the state is rather limited in its opportunities to rule the production and the consumption field. It will not be possible to find out the real state of things until the elections take place.

The hard currency is a simpler issue, though. The majority of economists think that it is a purely technical problem, which requires certain costs. Sergey Ignatyev, Central Bank chairman offered President Putin to consider the laws concerning the liberalization of the currency control. "In fact, the Russian ruble is a hard currency already - residents are doing practically everything that they want to, and so do a lot of non-residents," economist Nils Iogansen said. The so-called outflow of capital from Russia reaches $40 billion a year, according to various estimations.

However, the issue of the Russian hard currency is not a technical problem. It will not be possible to achieve such progress in the nearest future, as well as the eight percent of the annual economic growth. If the ruble becomes a hard currency, it does not mean that it will be possible to exchange the ruble cash to dollars, euro, yuans, and so on. It means that the ruble will be recognized as a suitable currency for international transactions. For example, a person will be able to go to a bank in some remote Russian town, make a ruble deposit, then go to a small German settlement, show Russian financial documents  in a bank there, and buy a small house. This will be a complete metamorphosis of the national economic and political system.

Even if foreign investors buy up Russian companies, natural monopolies, the whole Far East and Siberia, the Russian ruble will not become a hard currency on the foreign market anyway. Academician Viktor Ivanter said: "In fact, there are three conditions for the ruble to become an international currency. First of all, one should have a stable political system. Every person, who takes a ruble in his hands is supposed to realize the succession of the Russian power, because it also implies the money succession. Secondly, we should have a stable social situation. If one-fourth of the Russian population is poor, there is always a chance for a riot to take place. Finally, one needs to have the 100 percent reliable defensive capacity that would guarantee an absolutely independent state policy."

Probably, one has to add the foreign trade monopoly on the list too. Otherwise, the hard Russian currency will simply lead to the plundering of the national wealth, as it happened in the beginning of the 20th century, when tsarist prime minister S.Vitte put forward an idea of the golden ruble. Everything was over with the revolution and horrible losses for Russia. The present statistics says that Russia's share in global raw materials reserves makes up 40 percent, the share of the territory - 14 percent, the population – 2.5 percent, and the economy - 1.5 percent.

Konstantin Koshkin
Nezavisimoye Obozreniye