Kazakhstan suggests New Currency
President Nursultan Nazarbayev on Wednesday proposed a common currency for five former Soviet republics, a slap in the face for Russia, which has been promoting the ruble for the role.
Senior Russian government officials did not react to the proposal, but a State Duma deputy said Nazarbayev was sending a signal that Russia's neighbors harbored concerns about embracing the ruble.
Nazarbayev said the Eurasian Economic Community, a loose group of five former Soviet republics including Kazakhstan and Russia, could adopt a single non-cash currency -- the yevraz -- to insulate itself from the global economic crisis.
Yevraz is a newly coined word that sounds close to "Eurasia" in Russian.
"Its exchange rate shouldn't depend on the fluctuations of the world currencies," Nazarbayev said in a speech to an economic forum in Astana.
The Eurasian Economic Community also includes Belarus, Kyrgyzstan and Tajikistan.
Nazarbayev said the yevraz could be a step toward a common global reserve currency that would operate under the auspices of the United Nations. The Group of 20 meeting in London on April 2 should discuss such a global currency, he said.
The yevraz might be introduced in the next 12 months, said Zhamilya Bopiyeva, vice president of the Institute of Economic Research with the Kazakh Economy and Budget Planning Ministry. The new global currency could come into use in 10 to 20 years, she said.
"Using the non-cash currency would mean more stability to the Eurasian Economic Community because the ruble is influenced by Russia's domestic policies and oil prices," Bopiyeva said by telephone from Astana.
Bopiyeva brushed off any comparisons between the yevraz and the euro, saying the euro-zone countries are more politically and economically integrated than the Eurasian Economic Community.
Kazakh Presidential Administration officials said they could not comment on Nazarbayev's speech.
Kazakhstan, a major oil and metals exporter, is facing its first budget deficit in recent years because of a drop in commodity prices. It devalued the national currency, the tenge, by 18 percent last month.
"We need investment in roads and the power sector, and the yevraz would be ideal for investment in the sectors," Bopiyeva said. "Kazakhstan could pay Russia for modernizing its power stations with yevrazes, which Russia could use to buy tractors from Belarus."
Countries around the world are considering a shift away from the dollar as the international reserve currency after the United States began inflating its money supply to bail out the economy. Russia has been trying to position the ruble as the reserve currency of choice in the former Soviet republics.
Prime Minister Vladimir Putin said last month that the government had decided against imposing any limits on capital outflow because it was still betting on having the ruble to assume that role. President Dmitry Medvedev reiterated last week that the ruble had every chance of eventually becoming a global reserve currency.
Putin's spokesman Dmitry Peskov could not immediately comment on Nazarbayev's proposal when reached by phone Wednesday afternoon.
Eurasian Economic Community spokesman Vyacheslav Kovalyov hung up when asked to comment on Nazarbayev's speech.
A senior Belarusian Finance Ministry official said the government continued to support the ruble as a regional reserve currency, but he would welcome the arrival of the yevraz.
"We have a problem of non-payments with businesses in neighboring countries and would be glad to use the yevraz if it helps to solve them," the ministry's chief of international finance and public debt, Vadim Misyukovets, said in a telephone interview from Minsk. "It would be great if Russia, Kazakhstan and Tajikistan could use the yevraz to buy our tractors."
Nazarbayev may have voiced his yevraz idea as a way to let Moscow know that its allies are wary about its ruble expansion plans, said Konstantin Zatulin, a State Duma deputy and director of the CIS Institute, a think tank that studies the former Soviet republics.
By creating the yevraz, the countries would share control over the currency, said Yevgeny Nadorshin, a professor at the Higher School of Economics.
The yevraz has little chance of being more than an idea, Nadorshin said, because control of a new common currency would require closer political ties between the countries.
With proper assistance from the government, the ruble will continue to move to the status of a regional reserve currency despite losing a third of its value since summer, he said, according to the Moscow Times.