Russians Bet Ruble Will Rise To Status of Dollar, Euro, Yen
Thursday, June 29, 2006
MOSCOW, June 28 -- Long shunned by Russians who preferred dollars in their mattresses, the ruble is suddenly cock of the walk.
The Central Bank is planning to create a universal symbol for the ruble akin to the "$" denoting the dollar. A new 5,000-ruble note ($188) is about to enter circulation to reduce the bulge in the wallets of the country's growing class of tycoons. And parliament, in a fit of patriotic fervor, is mandating some ruble respect by banning public officials from counting in dollars.
The country's leaders are even eyeing the day -- still a long way off -- when the ruble will be traded around the world and earn the ultimate moniker: hard currency. At a economic forum in St. Petersburg this month, Deputy Prime Minister Dmitry Medvedev said he foresaw the time when the ruble would become an international reserve currency equal in prestige to the dollar, euro, yen and pound.
"The ruble is on the move," said Vladimir Zhirinovsky, the flamboyant ultranationalist legislator, invoking World War II to capture the country's newfound pride in the 800-year-old currency. "The next stop is Berlin."
For now, the value of the ruble is managed by Russia's Central Bank. As the dollar has slumped on world markets, the ruble has strengthened, rising to its highest level since early 2000. One dollar now buys about 27 rubles, a 5 percent slide this year.
The ruble's standing also has been helped by rising oil prices and Russia's position as the world's second-largest exporter of oil after Saudi Arabia.
A flood of cash is swelling state coffers; foreign reserves now stand at about $230 billion and the government is wiping clean its foreign debt. Russia announced this month that it will pay off its entire $22 billion debt to the Paris Club of creditor nations by August and agreed to an early repayment fee of $1 billion.
The Russian public's old view of the ruble was reinforced by the financial crisis of 1998, when the country defaulted on foreign debt and devalued the currency.
Now people are showing new respect for the home currency. Nina Segalova, a 50-year-old accountant in Moscow, used to convert part of her salary into dollars, but has stopped and now saves exclusively in rubles. "I think people like me have new confidence in the ruble because it's getting stronger and it's safe," she said.
In the past three years, the foreign cash held by Russians has fallen by $10 billion, according to Anton Struchenevsky, an economist at Troika Dialog, a Moscow investment company. Savings held in rubles in banks has jumped more than five times to $50 billion since the 1998 default, according to official statistics. Russian banks offer customers both ruble and dollar accounts.
In his state of the nation address this year, President Vladimir Putin said he wanted to lift currency restrictions on international capital transactions by July 1. He also proposed creating a ruble-denominated international oil exchange in Moscow to stimulate demand for the currency.
As the ruble edges its way onto the international stage, the Central Bank is deciding on a symbol for the currency. A state-run polling agency recently held four focus groups in Moscow to test 13 symbols, including one that received preliminary approval from the Central Bank -- PP, the Cyrillic letters for RR, for Russian Ruble.
Muscovites, however, preferred a simple roman R with two strokes across the upper part of the R, according to Valery Fedorov, director general of the All-Russian Public Opinion Research Center. "PP may arouse different associations," Fedorov said, "and the focus groups thought the symbol should be easily understandable for foreigners as well as Russians."
He said that the focus group participants thought that "a ruble symbol is as important as the national anthem." The newest part of the ruble family, the 5,000 note, will be released in July -- bills for billionaires, some Russians are joking. .
Nikolai Fedotov, head of quality control at the state's printing facility, told the Moscow News that "U.S. dollars with their uneven edges and other defects would never make it past our quality-control section."
What Russians have not been able to control is their penchant to price things in dollars or euros, whether restaurant meals or new apartments or government spending.
In May, the State Duma, or lower house of parliament, gave initial approval to a bill that would require all commercial establishments to express their prices in rubles. It promised to fine officials who dare use the word dollar.
Putin may not have gotten the word yet. Speaking last week about Russia's decision to pay off its foreign debt, he said that "the total amount of saving on these interest payments will exceed $7 billion."