The recent meeting of the presidents of Russia, Belarus and Kazakhstan that took place in Astana highlighted the transition to a more active phase of monetary union creation carried out by these states. This measure should allow the countries of the Eurasian Economic Union (EEU) to promptly respond to financial and economic threats, along with protecting the common market. There’s little doubt that this decision was affected by a number of factors, including the international political agenda and the present-day economic challenges. After all, any fluctuation of national currencies within the EEU may have trade distorting effects, due to the fact that a closed ecosystem, where goods, services, capital, labor circulate between its units, any changes in the exchange rates affect the whole system.
In addition, the recent devaluation of ruble has made dollar exchange between the EEU states more expensive. To make matter worse, the West, following the policies imposed by Washington, is constantly threatening Russian to disconnect it from the SWIFT international payment system, while the members of the EEU are still obtaining confirmation from Western financial centers when they carry out transactions within the Union, but this situation is about to change.
On 1 January 2015, the EEU has officially become the spiritual heir of the Customs Union, and today its members: Russia, Belarus, Kazakhstan and Armenia are negotiating the accession of yet another member to the EEU in the near future – it’s Kyrgyzstan. Last year, the members of the EEU have signed an agreement in Kazakhstan on the creation of Eurasian Central Bank that will have the authority to emit a common currency.
A decree that was signed on March 10 by Russia’s President Vladimir Putin implies that both the government and the Bank of Russia in close cooperation with the central banks of the EEU member states should determine the possible ways of monetary and financial integration, along with evaluating the possible benefits for the respective economies. By June 1 Russia’s government should ensure that Russian ministries and departments are engaged in the creation of a unified market of goods and services, while making all the necessary legislative adjustments to Russian laws.
However, apart from the economic component of this step, there’s a number of political and social implications. All comes down to the notion of making the new currency a widespread means of payment. First of all, the national currencies of Russia, Belarus and Kazakhstan are now undergoing some rough times. Additionally, 90% of the economic basis for this association is provided by the Russian Federation, therefore, to make this currency work some additional investments must to be made by Russia. Secondly, the trade between the members of the EEU are facing certain complications caused by individual disputes between the members of the Union on the movement of capital and goods, which wouldn’t be affecting the integration processes in a positive way.
Yet, all the members of the Union have a clear understanding that this step is the only logical thing to do if they strive to achieve a complete depolarization of the space and minimize the costs of mutual trade. There’s a certain amount of experience that has been accumulated by every member of the Union, since the “original” ruble had been in extensive use in this space in the period of 1949-1991.
As for the name of the new currency, it is unlikely that we will see “ruble” being used again. Last year, Kazakh President Nursultan Nazarbayev proposed two names:
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“euras” – similar to the European currency,
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“altin” – the name that was widespread during the times of the Golden Horde
The main advantage of that new currency is that, unlike dollars and a number of other modern currencies, it will be supported by some real economic figures. Those conditions, according to international experts, are pretty unique, since only Russia, Belarus, Kazakhstan, Canada and South Africa can achieve something of the sort today. For this reason, there’s a high probability that this new currency will not only be used by the countries of the Eurasian Union alone, but by a number of other countries, that do want to get rid of their dependence on Washington. In fact this trend has already started, since Germany, Italy and France have voiced their intentions to become founders of the Asian Infrastructure Investment Bank that is being created by China, while Turkey and Iran are considering the option of joining the EEU.
Vladimir Platov, an expert on the Middle East, exclusively for the online magazine “New Eastern Outlook”