Author Topic: Russia wants single currency for Eurasian Economic Union  (Read 3983 times)

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Offline rundontwalk

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Russia wants single currency for Eurasian Economic Union
« on: April 04, 2015, 08:34:02 PM »
I thought this was interesting. Russia is proposing a single currency for the Eurasian Economic Union a bloc currently composed of Russia, Belarus, Armenia, and Kazakhstan.  Kyrgyzstan will also join soon.

Quote
The union is still in its early days, having formally begun only in January, but the bloc has tentatively agreed to bring in a single currency and a Eurasian Central Bank by 2025.
read more: http://www.businessinsider.com/russia-eurasian-economic-union-could-get-its-own-single-currency-2015-3#ixzz3WMmwi7HO

If this gets up and running some of the other Central Asian states might join up too. That's where the most logical room for growth  would be I imagine.

Do you think this is likely to happen?

eta: Thanks for moving the thread.


« Last Edit: April 05, 2015, 02:10:36 AM by rundontwalk »
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Offline <k>

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #1 on: April 05, 2015, 12:03:39 AM »
Do you think this is likely to happen?

Who knows? 2025 is quite a way off. A lot could happen in the meantime. Things seemed relatively stable worldwide until 2014, then we had Ukraine, ISIS, etc. Now climate chaos kicking in elsewhere, e.g. Chile, Brazil, California. The world has its bouts of instability, and we seem to be in one. Russia is certainly trying to increase its influence in the world, nonetheless.
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Offline Pabitra

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #2 on: April 05, 2015, 01:47:50 AM »
It would be much earlier than that.

The name of currency is already decided as "Altyn".

It may get issued as soon as sanctions against "Rouble" get imposed.

Offline Figleaf

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #3 on: April 05, 2015, 02:29:01 PM »
Currency unions are as old as the Roman empire. They are usually imposed by one party and do not survive the implosion of that party. The exception is the euro area, which is voluntary and - though much influenced by Germany - a mix of interests.

Putin is internationally isolated since his Ukraine adventure. It happens mostly in the background, unobserved, but it bites and hurts. He is frantically looking for allies. China gave him terms he couldn't accept. North Korea is not serious, Cuba has even gone the other way, so now this.

It is not a proposal for another euro area. It is a proposal for a new solidus, reminiscent of the CMEA. It is a proposal the others cannot refuse. It will go nowhere in particular. The reason is simple and economic. Russia has very high inflation, a weak currency and a large economic bulk. Any real attempt by the others to link to the Russian economy will ruin their economy. They know it, so they'll do what they did before 1991: say yes, do no.

Peter
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Offline Pabitra

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #4 on: April 05, 2015, 02:52:49 PM »
Other than Ukraine, all the proposed member countries are facing same challenging monetary situations as Russia.
Better together than separately.
After all , they all had Soviet Roubles as their currency not so long ago.

Offline Figleaf

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #5 on: April 05, 2015, 03:06:15 PM »
First, learn the lessons of the Asian crisis: you cannot link currencies if the rate of inflation is different in the long run. Also: only the Kazakh economy resembles that of Russia, being largely dependent on oil.

Second, they broke away from the Soviet Union recently for reasons that included severe racial discrimination (you can still meet that in Moscow), exploitation from the centre and of the wish of the local dictators to fill their bank accounts in foreign countries. It is not even in the Russian interest, as it would be a complication for domestic Russian economic policy. These are as many reasons why the proposal does not have a shadow of a chance to be put into practice. It will provide for nice free shopping trips for civil servants, though.

Peter
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Offline Pabitra

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #6 on: April 05, 2015, 05:00:14 PM »
But it will protect Russia from getting its currency frozen and international trade hampered, at a very nominal cost since the common currency is free from sanctions.
Very like Germany protecting some EU states to protect Euro, Russia can support minor economies in its own larger interest.
Civil servants on the right side of current leader will continue their shopping trips in all major shopping centres, irrespective of currency turmoil at home. world Bank in NY and ECB in Brussels will remain their watering holes.

Offline Figleaf

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #7 on: April 05, 2015, 05:42:55 PM »
On the contrary, it will spread Russia's self-inflicted woes to participating countries. The EU sanction are mere pin-pricks, useful politically for both sides, but economically significant only for traders hit directly. What really counts is the low oil price, high rouble inflation and the imploding rouble, caused by the stupendous expense of having the army in the Ukraine (something Putin keeps denying, to the detriment of his own credibility.) Russia is losing grip on its own economy. It cannot "protect" the others from anything, only spread its own problems.

BTW, Germany doesn't protect anyone either. Bundesbank (and Dutch) policies are arguably too one-sidedly focussed on inflation fighting, but the others protect the German economy from the views of its own central bank. Likewise, French (and Belgian and others') policies are arguably too focussed on employment, but the Bundesbank influence injects some discipline in them. The mix may not be the optimal outcome, but it is better than what each of them would have done individually. That outcome is not possible for Russia et. al., as it dominates the others politically and economically.

Peter
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Offline rundontwalk

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #8 on: April 05, 2015, 08:55:46 PM »
From the perspective of Russia, a currency union might help limit further Nato activity in its sphere of influence. In Central Asia there's also concern with the strengthening position of China.
''Been in a palace, been in a jail. I just don't want to be reborn a snail.'' - The Pogues

Offline Gagarin_Andrey

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #9 on: December 24, 2015, 06:03:24 PM »
Belarus meets a new coins and banknotes next year while the denomination, so next several years will be no great sense for this country to join the currency union.

Russians might want to establish the rouble in that countries and increase the financial influence in Asia
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Offline Figleaf

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #10 on: December 24, 2015, 08:18:48 PM »
Belarus inflation is 8%, Russian inflation is 15% and the rouble is still falling. It is not in the interest of Belarus to import Russian inflation.

Peter
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Offline Pabitra

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #11 on: December 24, 2015, 09:02:39 PM »
Belarus meets a new coins and banknotes next year while the denomination, so next several years will be no great sense for this country to join the currency union.

Belarus coins for the first tranche are already lying in their vaults since 2009. Only difference is that in 2009, the demonetisation was at 10000:1 ratio whereas now it is proposed at 100000:1.

It will not require not very big push for them to let the bags lie there for some more time.

Russian inflation is largely due to European embargo. Euro is also suffering due to non export of several items to Russia. Sharp fall in crude prices has only helped softening the fall of Euro.

Offline eurocoin

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #12 on: March 25, 2016, 07:58:59 PM »
Eurasian Economic Union official dismisses common currency plan

A senior member of the Eurasian Economic Commission’s board on Monday, February 8 ruled out plans for adopting a common currency, citing economic reasons as a serious impediment, Tert.am reports.

Tatyana Valovaya, Member of the Board - Minister in Charge of the Development of Integration and Macroeconomics of the Eurasian Economic Commission, said that such a switchover, if approved, would lead to negative economic consequences at the current stage.
Instead, the official stressed the need of deepening macro-economic cooperation which she said could be possible in case of using national currencies in trade turnover among the member states of the Eurasian Economic Union (EEU).

Asked about the timeframes of employing the system and Armenia’s chances to make the payments for natural gas in the Russian ruble (which has been repeatedly proposed), Valovaya said that all the member states of the bloc can make any payment in their national currencies provided they establish the necessary economic grounds.

“To make payments in the national currency possible we need to establish economic grounds. That doesn’t mean we are willing to ban any side from trading with a third country and making the payment in the respective currency. What we want is to facilitate the interstate calculations for the member states,” she noted.

Valovaya said she is aware that the Armenian partners are now actively working towards implementing the idea.
“With the emerging need of currency conversion from U.S. dollar to ruble and the Armenian dram to dollar, the process becomes long-drawn-out. So we are now actively considering possible tools to make the transfers in national currencies possible,” she said, adding that the plan is likely to be realized in the nearest future.


Offline Figleaf

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #13 on: March 25, 2016, 10:51:16 PM »
Sounds reasonable and practical, unlike a monetary union. Countries whose currency has become unacceptable in international trade can work their way back with time and economic and financial discipline. The first step is usually a clearing bank, an institution that will clear payments for transactions in opposite directions. This saves foreign exchange conversion cost, especially when the countries involved have a good amount of bilateral trade. The next step could be multilateral clearing, a merger of bilateral clearing banks.

However, the whole idea won't fly at the moment. The problem is that Russia is still facing the threat of hyper inflation, due to its humongous military expenditure abroad plus low oil prices, that eat into its most important hard currency exports and wreak havoc on its government budget. In other words, anyone holding rubles for a week or so risks foreign exchange losses. Clearing usually takes longer, so it will be unacceptable.

If the other party to the clearing arrangement has a currency that inflates at a comparable speed, it might accede to a clearing arrangement. The danger is that the country with the "lowest" inflation rate is motivated to pay as slowly as possible, while its clearing partner would want to get paid as quickly as possible, which would eventually spell the end of any clearing arrangement.

Recovery is possible if Russia can get its financial house in order. The fastest way to do that is to withdraw from the Ukraine. I don't see that happening any time soon and hope to be wrong.

Peter
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Offline <k>

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Re: Russia wants single currency for Eurasian Economic Union
« Reply #14 on: March 25, 2016, 11:02:56 PM »
Sounds reasonable and practical, unlike a monetary union.

Peter

So you are against the monetary union known as the euro?  :o
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