Monday, October 18, 2010

Window on Eurasia: Primorsky Kray Deputies Suggest Reviving a Regional Currency

Paul Goble

Staunton, October 18 – Several deputies in the Legislative Assembly of Primorsky kray in Russia’s Far East recently suggested re-introducing a regional currency much as that region and more than 20 others had in the early 1990s in order to make social payments and thus avoid public protests when there is a delay in the physical transfer of rubles from Moscow.
While there is no indication that that legislators there are prepared to take a step that would violate a 1995 Russian Federation law, Ruslan Gorevoy says in today’s “Novaya versiya,” the proposal shows that “subjects of the Federation are [even now] keeping their own currency from the early 1990s” (
And that makes an examination of what many of the country’s regions and republics did at that time not only a matter of historical interest but quite possibly a model that some regional elites may follow in the event of the onset of a serious financial or political crisis in the Russian capital at some point in the future.
After the Soviet Union fell apart in 1991, Gorevoy writes, the value of the ruble fell so rapidly that Moscow was often incapable of supplying the regions with the physical currency to pay what the government owed the population. And as a result, he says, “the Russian government secretly permitted 20 some regional leaders to print their own money.”
Other regional leaders soon followed, and had any of them shown real initiative, businessman Artyom Tarasov says, after only a few years no one in the Russian Federation would even have had a memory about the ruble. But most, locked in Soviet-style caution, didn’t push these regional currencies very hard, and they circulated right alongside the ruble.
“Only in 1995,” Gorevoy continues, did Moscow adopt a law on the Russian Central Bank, one of whose provisions (Article 27) was that “the introduction on the territory of the Russian Federation of other monetary units and the production of monetary surrogates is prohibited.”
But as the “Novaya versiya” writer suggests, “if in the Far East or in Kaliningrad there isn’t enough money to deal with budget allocations, the local powers that be could perfectly well say to Moscow that there isn’t enough cash and thereby provoke in this way new conversations about their own money, ‘not tied’ to Moscow.”
Tatarstan was “one of the first” to introduce its own currency, taking that step already in the summer of 1990. It then imported currency printed in Britain in February 1992 with plans to introduce it on January 1, 1994. The reason, Tarasov says, is that Kazan didn’t want to take that step at the same time as others and thus prompt Moscow to come down on all of them at once.
At that time, the businessman continues, Yegor Gaidar had a plan for such currencies: they were supposed to function “on an equal basis with the ruble but only on the territory of the Russian Federation.” They were not to be used internationally – “in any case, according to the federal powers that be.”
Such local money was “immediately issued” in Nizhny Novgorod, Khakasia, Blagoveshchensk “and a number of other cities” and regions across Russia. There were many problems and curiosities: In Nizhny, the bills were so poorly printed that counterfeiting was simple and thus widely practiced.
Because of that, they were quickly replaced by government bonds. The bonds were then paid off, “and the unsuitable rubles destroyed – and this is the only case when ‘separatist’ money was not carefully saved until better times.” Elsewhere the physical bills generally have been retained, even if they are not honored as legal tender.
Meanwhile, in Blagoveshchensk, the local authorities wanted to avoid Moscow’s anger and so they had the currency they needed issued by an industrial concern as internal accounting funds. The name of the firm was SOPPIT, and that became the name of the denominations. “Sopps circulated alongside the ruble until 1995.”
The most famous case of regional currency involved the Urals francs printed up by Governor Eduard Rossel after he secured Gaidar’s approval. He said he had warned the Moscow official that planned reforms would leave Western Siberian governments without the currency they needed to make payments, and Gaidar agreed to the issuance of that regional currency
Many “Urals francs” are still around. “In 1996 and again in 1998, the Office of the Procurator General sanctioned the destruction of these bills,” Gorevoy says, “but this was not done.” And people there, he implies, appear to be retaining them less as curiosities from the past but as potentially valuable pieces of paper.
The most curious case of regional currency involves Chechnya. In early May 1993, the Central Bank of the Russian Federation and the National Bank of the Chechen Republic, at a time when Dzhokar Dudayev was president, signed an agreement on money, “in which was de facto recognized the financial-credit sovereignty of the republic.”
Six months later, the Chechen authorities decided to issue their own bills and ordered them from a British firm. The bills were printed but the war prevented their widespread introduction. More recently, Gorevoy says, there have been rumors that current Chechen head Ramzan Kadyrov has had all the rest of the print run transferred.
If that is the case, the “Novaya versiya” journalist asks rhetorically, “why did he do so?”
But if Chechnya is not thinking about having its own currency again, others apparently are. Tarasov told Gorevoy that “at the present time, the prospects for the appearance in Russia of regional currencies exist,” and those prospects will only brighten if the economic and political clouds over Moscow darken.

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