Gazeta: “Is the Tugrik Worse than the Dollar?”
Konstantin Smirnov
Mongolia proposes establishing an alternative to the IMF at the SCO meeting
Addressing a meeting of the Shanghai Cooperation Organisation's heads of government in Astana on Wednesday, Prime Minister Vladimir Putin said, "A qualitatively new geopolitical situation is emerging, with accelerated strengthening of new centres of economic growth and political influence."
Putin proposed the following anti-crisis recipe: "To change the global financial system, to take a new look at the role of the existing and to create new international institutions capable of ensuring true stability and progress." For starters, he proposed replacing the dollar with national currencies in bilateral and multilateral settlements within the SCO.
Vladimir Dmitriyev, the head of Vnesheconombank and the SCO Interbank Association, elaborated, saying, "The dollar is losing ground, and besides, settlement in national currencies is convenient in terms of financing military-technical supplies, especially after the U.S. imposed sanctions against Rosoboronexport."
True, Mr Dmitriyev was unable to elaborate on the technical details of the transition from the dollar to the rouble, yuan and even the Mongolian tugrik, but Chinese Premier Wen Jiabao promised to continue easy-term credits for bilateral and multilateral SCO investment projects. Though he did not specify the currency in which payments would be disbursed, according to Chinese assessments, China's trade with the SCO countries will reach $100 billion and will continue to expand.
Nonetheless, even China's sovereign wealth has been shrinking due to the world financial crisis. Wen Jiabao was generous on that day, promising to pay China's contribution to the authorised capital of the newly created SCO Development Fund, which is similar to the Russian National Wellbeing Fund. The new fund is intended to finance major joint investment projects, above all in the energy sector. It was decided to create a common energy space, initially by introducing uniform rules of customs control over the movement of energy resources. An agreement to the effect was signed in Astana on Wednesday.
Mongolian Prime Minister Sanjin Bayar went even further and proposed the creation of an SCO emergency fund that would grant prompt stabilisation loans to member countries that encounter financial and especially budgetary problems. He did not use the acronym IMF, but it was absolutely clear (Bayar speaks Russian without an accent) that he was referring to a regional version of that international financial institution. It was in line with Putin's proposal to create new financial institutions to ensure stability. However, the Mongolian initiative passed unnoticed, unlike the development fund that was backed by all SCO members and observers.
When asked to comment on the Mongolian idea Vladimir Dmitriyev replied curtly, "Ask the Mongolian Prime Minister." However, Putin may return to Bayar's idea. Commenting on the results of the Astana meeting, the Russian Prime Minister said that all the proposals would be taken into account, although not all of them have equal chances. Tajikistan's Prime Minister Akil Akilov, for example, called on his colleagues to provide better social guarantees for labour migrants to cushion them against the consequences of the crisis. That proposal, however, is unlikely to be listed among the priorities.
The Iranian First Vice President, Parviz Davudi, proposed setting up "an independent financial system for the economic development and social well-being of the peoples in the region" within the SCO framework. Parviz Davudi told Putin that "not only the regions, but the whole world, need a strong Russia". Oriental praise was sure to strike a chord with Putin, though he was reticent in his remarks yesterday. He even deleted the following phrase from the notes prepared by his speech writers: "We believe that further developments will see an increased role of the state as the guarantor of favourable national development."
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REFERENCE
In addition to Russia, the Shanghai Cooperation Organisation includes China, Kazakhstan, Kyrgyzia, Tajikistan and Uzbekistan. Mongolia, Iran, India and Pakistan are observers. Afghanistan is also forging a relationship with the SCO.
