Underconversion

The convertibility of the ruble is postponed indefinitely

One day, on May 10, 2006, Vladimir Vladimirovich Putin delivered a message to the Federal Assembly of the Russian Federation. He recalled that he set the task of ensuring the convertibility of the ruble back in 2003, and proposed completing this work by July 1 of this year. According to the transcript of the speech, at this point he received applause.

The Address to the Federal Assembly is called so because the president in it addresses legislators, members of the State Duma of the Russian Federation and the Federation Council of the Russian Federation. That is, the task of making the ruble convertible was set before deputies and senators. The political background of the demand was absolutely clear: on July 15, the leaders of the G8 countries would come to the country. By this time, Russia should have boasted of the successful IPO of Rosneft, the repayment of all, or most of, debts to the Paris Club, as well as the formal inclusion of the Russian currency in hard currency.

Games with concepts

The authorities have been dreaming of making the ruble convertible since the late eighties. At the same time, few people were interested in what a freely convertible currency is. Let's give a definition. Freely convertible is a currency that is freely exchanged for other foreign currencies and international means of payment. To do this, it is necessary to cancel all currency restrictions.

In theory, after such restrictions are lifted, Russian capital will be able to freely travel abroad, and foreign capital will be able to be safely invested in the Russian economy. Then, depending on the demand for Russian currency, tourists will be able to exchange rubles for local currency in an increasing number of banks, and the ruble will make its way to the main trading platforms. So far, only Chicago traders have shown interest in rubles. CME (Chicago Mercantile Exchange) conducts trading in futures for the ruble exchange rate.

Here lies a small terminological subtlety. The fact is that there are concepts of “freely convertible” and “freely usable” currency. And if the ruble becomes the first, as soon as all the formalities with the Central Bank and legislators are settled (and they are far from settled, as we will discuss below), then the status of a freely usable currency will be issued by the International Monetary Fund.

SCR

The most widely used freely convertible currencies are the US dollar, euro, Japanese yen, and British pound sterling.

There is another sign of currency convertibility - its use as a reserve. Real recognition of a currency begins when banks in other countries use it in their reserves. The Bank of Russia will even be able to earn additional funds from external issues without inflationary consequences.

Currently, the main reserve currencies are the dollar and the euro. However, if you believe, for example, the Chinese, then the ruble has already leaked into their foreign exchange reserves - the People's Bank of China announced this during the recent revaluation of the yuan. Then bankers reported that the basket of currencies included over 30 monetary units from different countries.

Reality

All this will be in the future. When will the ruble become convertible? In fact, the ruble did not become convertible on July 1. The idea of “conversion” was approved only by the government, and, in accordance with the law, a document on the abolition of currency restrictions must be submitted to the State Duma, then transferred to the Federation Council, and finally - for signature by the president. Legislators did not have time to approve the document. Thus, the ruble did not become convertible either de jure or de facto. As for de facto, by the way, experts give different dates - mainly 2008 and 2009.

At the same time, the media are celebrating victory on the currency front. Thus, Channel One declares : “As of today, the last restrictions in the foreign exchange sector have been lifted in Russia.” “Since July 1, Russia has become a liberal country,” NTV rejoices .

It is clear that the formal convertibility of the ruble is a matter of several weeks. What opportunities will it give to the citizens of the country?

Now Russians will be able to withdraw capital abroad, and the authorities will no longer be afraid of capital outflow. For example, Alexey Kudrin, in an interview with the Vesti program on the Rossiya TV channel, said that in 2005, for the first time, more capital came to Russia than left it. From this he concluded that the danger of capital flight was practically eliminated.

The same minister a couple of weeks ago, at the St. Petersburg International Economic Forum, noted that in Russia, despite the zero balance of capital flows, the outflow of funds continues. He explained that the growth of gross capital, as well as an increase in loans and direct investments with a zero balance, indicates the persistence of large capital outflows. Among the reasons for this phenomenon, Kudrin named high oil prices and the departure of oil production enterprises to the West. Which of the Kudrins to believe, the June one or the July one, is absolutely unclear.

Ironically, it is unlikely that Russians will be able to return a significant part of the capital already abroad back to their homeland - the tax amnesty project is still being discussed. It should be taken into account that with the lifting of restrictions on transactions with currency, monitoring of the movement of large sums will not be canceled. In other words, the free movement of capital will be monitored by serious people from financial intelligence. In addition, when conducting transactions with this foreign account, the citizen will be required to notify the tax office.

In the foreseeable future, Russian citizens will also be able to bring rubles to resorts and tourist capitals of the world - the banks operating there will most likely treat the Russian currency with respect. Another thing is that this does not require legal subtleties - for example, on the beaches of Turkey, merchants have already begun to take rubles, although they hardly know anything about the convertibility of the currency. It’s just that a suitable exchange infrastructure has been created nearby.

Conclusion

Additional convertibility of the ruble should be given to commodity exchanges, where payments will be made in rubles. If the officials' dreams come true, then in the future energy prices will be determined not in dollars, but in Russian currency. At least in the gas wars with Ukraine and Belarus.

There is confirmation of this. The Minister of Finance gave the following example of the convertibility of the ruble - “when our Russian currency begins to circulate among our trading partners, for example, Belarusian enterprises will pay Ukrainian enterprises in Russian rubles, this is exactly a new quality of the Russian currency.” Thus, officials want to start small - to accustom at least neighboring countries to the type of ruble.

This is such an underconversion.

Alexander Amzin

Underconversion

Games with concepts

Reality

Conclusion

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