Byline: Dmitry Butrin, Maxim Shishkin
Yesterday, Prime Minister Vladimir Putin offered to create a "currency pool" with Belarus, its partner in the Union State, and use the Russian rouble in energy trade with Russia at least as long as the financial markets remained jittery. The idea is, in effect, to peg the Belarusian rouble to the Russian rouble. But, as with the adoption of the Russian rouble, Belarus will still have to change its budget policy if it joins the pool.
Yesterday, following talks with the President and the Prime Minister of Belarus, Russia's Prime Minister Vladimir Putin said he had discussed a currency pool with his partners. He suggested that Belarus pay for Russian oil and gas in Russian roubles. Mr Putin said settlements in US dollars "looked strange." "The problems with the US economy and the US currency system are well known. Therefore, we need to consider this change. It's important for the Russian national currency," Mr Putin said.
A currency pool in this sense was first established in the 1940s by the United Kingdom and in the 1990s by some South-East Asian countries. It means partial joint regulation of national currencies by drawing on participants' international reserves. With Russia and Belarus, it means combining some of their gold and hard currency assets. It is more a matter of image for the Russian rouble: Russia has over $540 billion in international reserves. By September 1, those of Belarus stood at $4.58 billion as reported by the IMF and $5.6 billion as reported by its National Bank. The Bank does not reveal what parts of the reserves are in roubles. However, its 2007 annual report says some of the reserves are in correspondent accounts with Russian banks, and 80% of this sum is kept in a "partially convertible currency" (the rouble was thus designated early last year).
Belarusian President Alexander Lukashenko has good reason to accept Mr Putin's proposal. In the first six months of 2008, Belarus had an import balance of trade with Russia of $6.7 billion. It exported $6 billion worth of goods to Russia and imported $12.7 billion. In the balance of payments published by the National Bank, the entry "Multilateral settlements and statistical variance" shows $5.8 billion. This figure is close to the debt accumulated by Belarusian companies to Russian firms and the Russian government since the beginning of the year.
Regardless of the structure of the currency pool, the point is to peg the Belarusian rouble to the Russian rouble. Mr Putin's offer is an alternative to Belarus' direct adoption of the Russian rouble. Mr Lukashenko has repeatedly rejected that proposal and since the middle 1990s has been speaking only of a "single money issuing centre" for Russia and Belarus. So far, Russia's proposal looks more attractive for Belarus than for Russia. But this mechanism will weaken the Belarusian National Bank's role in macroeconomic regulation: its reports already show different figures than Russia's. According to the CIS Statistics Committee, inflation in Belarus in 2007 was 8%, while Russia's estimates put it at 9%. A currency pool will require greater transparency from Belarus' National Bank. Belarusian Prime Minister Sergei Sidorsky never used the word "pool" in his reply to Mr Putin.
