The Eurasian Economic Union’s Plans for a Common Currency: Altyn or Euraz?

The Eurasian Economic Union is a Russian-led project. On the way of forming it, then Prime Minister Vladimir Putin announced that from January 1, 2012 the Common Economic Space of Russia, Belarus and Kazakhstan would be created, which would pave the path for the establishment of the Eurasian Economic Union. Thus, the Custom Union (CU) of Russia, Belarus and Kazakhstan, launched in 2010[1] was evolved into the Single Economic Space (SES) on January 1, 2012 with Armenia announcing about its interest to join the project on September 3, 2013.

The Eurasian Economic Union was put into force on January 1, 2015. Its purpose can be correlated with Russia’s competitive disposition with the EU, regarding the post-Soviet Union countries. Additionally, the initiative can be Russia’s attempt to counterbalance the EU’s appeal and influence.  Hence, whereas Russia claims that integration is beneficial for all the parties engaged, in reality the picture is not that clear-cut. One of the causes are the political systems and structures of the member states of the Eurasian Economic Union – they are not democratic, disposed to corruption and instrumentalization of law. Another evidence is Russia’s aggressive policy of recent years. Moreover, the country’s superior position in shaping the EEU also comes to prove that the project is actually a simulation of integration. The EEU seems to be driven forwards by forceful integration, which is becoming less and less favorable for the member states except for Russia, per se.

Hence, the EEU’s functioning will mainly be dependent on Russia which seeks to push integration involving more and more spheres from which it can get utmost benefits. Such an opportunity appears to be the introduction of a common currency within the EEU. Thus, while other founding members states of the project have been less supportive to such a plan and have been increasingly imitating integration rather than opting for it[2], on March 10, 2015, Russian President Vladimir Putin instructed the Central Bank of Russia and the Government „to determine the potential dimensions of the integration in the monetary and financial sectors in the framework of the Eurasian Economic Union with a study of the feasibility of establishing a monetary union in the future.“ Putin’s this instruction is to be worked out together with the central banks of the member states of the EEU by September 1, 2015. And the new currency can appear already in 2016[3].

Among many issues the establishment of a monetary union presupposes introduction of a common currency.  Hence, according to the documents ratified by Russia, Belarus and Kazakhstan in May, 2014 in Kazakhstan, a Eurasian Central Bank and a common currency was supposed to be established by 2025[4]. To the point still in 2014 Rinat Abdullin, the chairman of „Altyn Kara“ Bank, stated: „Personally, I see absolutely nothing wrong with the introduction of a single currency for our three countries. Many of us lived in the Soviet Union, and they remember that there was a single currency such a large area – the ruble, which was accepted everywhere. No matter whether you were going to the Far East, Siberia or Georgia – it was very convenient, because there was a confidence that all prices are formed in a common currency. This situation is much easier for business, as well as for the calculation of ordinary people“[5].

Yet, the Russian president decided to accelerate the process and this at a time when Russia faces a serious economic crisis and the ruble has practiced a severe depreciation[6] as a result of which the amount of mutual settlements among the member states of the EEU in dollars has increased. Moreover, the West speculated to turn off Russia from the interbank payment system SWIFT, yet to make transactions, say from Russia to Kazakhstan, it is necessary to obtain confirmation from the American settlement centers. Obviously enough, the tense foreign policy pushed Putin to rush with the initiative.

In reaction to the initiative, Armenian Central Bank Board member Armenak Darbinian stated, “there is no document among those signed [by Armenia] within the framework of its accession to the EEU that would concern the feasibility study or prospects related to this matter (introduction of the common currency)… There have been no negotiations, no formal discussions in this direction yet. I would say more: the issue of forming a single financial market regulator was discussed within the framework of the EEU and it should happen after 2025. During this time, national laws and regulations should be harmonized and only then the issue can be put on the agenda. It cannot be an administrative decision. This requires relevant developments in the economy and in the financial markets”[7].

Yet Prosperous Armenia Party former MP, economist Vardan Bostanjyan considers it quite feasible that Armenia incorporates a common currency with the EEU. He adds that it will have a favorable impact on the country, saying that “solely by the fact that quite a number of Armenians are in that [EEU] region; the word is about the migrants who are having losses in the case of [currency] exchange rates. But, now, they will not have that”[8].  However, there are also contra opinions. As such Armenian economist Ashot Yeghiazaryan said, “If we switch to the ruble, or another Eurasian currency, and if our Central Bank begins to keep its funds in that currency, discrepancies will arise between the currency loans, and our entire microeconomics will deviate”[9].

It is to be mentioned that the idea of establishing a common currency has not been accepted straightforwardly also in Belarus and Kazakhstan. The director of the Institute of the Global Political Economics of Kazakstan, analyst Akimbekov Sultan said that the instrumentalization of a common currency should not be an issue of a near future. He states that while the idea is interesting there are apparent problems – all the member states have different levels of development. Moreover, Belarus has not yet undergone those market reforms that, say Russia and Kazakhstan went through.

Belarusian columnist from the Belarusian Radio Liberty and political scientist for the „Strategy“ center Valery Karbalevich stated, “And if we are talking whether the Member States of the EEU in general should have a single currency, I do not think that Kazakhstan and Belarus will agree. This would mean that these countries lose their sovereignty”[10]

With all the events, facts and discussions at stake, it is still to be mentioned that it is totally unthinkable that, for example, during the creation of the euro in the years 1990-1999 (Maastricht Treaty to book-money introduction[11]), and this since the Pierre Werner Plan from 1970, one president would have given a commando to „his“ central bank ordering a study on the possible common currency, predicting its effective introduction for the next year, while the order to the central bank has gone out in March of the current year. Observers from European Union sources, asked privately, have the presumption that the Russian president has an „economic psychogram“ being somehow „actively jealous of the EU acquis communautaire“ which he wants to be caught up rapidly, and „while common currencies are to be welcomed in general, any too fast introduction can damage the participating states considerably“, even if the central bank of the integration is not de facto independent.

As for the idea of the Eurasian currency, on the whole, it dates back to 1994 when the President of Kazakhstan, Nursultan Nazarbayev proposed the notion. In 2012 Vladimir Putin endorsed the idea. The Kazakh President has never been suspicious to reset Soviet Union or Soviet Union 2.0., he was however all the time for economic integration, until a certain time in Central Asia[12]. Concerning the currency within the framework of the EEU, it is said to be similar to the Russian ruble. As for the name of the forthcoming common currency two options, are being discussed – Altyn and Euraz. The first name – Altyn, mentioned by Nazarbayev in 2014, meant a three penny coin in Old Russian and the word itself stems from the Golden Horde. The second name – Euraz, is parallel to, or a kind of imitation of the Euro[13].

It is envisaged that the key element in sustaining the new currency will be raw oil exports from Russia and Kazakhstan. Therefore, it has been decided to base the Central Bank of the EEU in Almaty, Kazakhstan. Evidently, the involved EEU governments want to rely more than ever on oil and gas exports, which is diametrically opposed to what also Russian economists preach. The potential market will include about 180 million people, with the total volume of GDP being more than $ 2 trillion.[14]

Yet, it is under a question whether the member states of the EEU, can indeed make the functioning of a common currency a reality. All the currencies of the member states currently face fluctuations and to avoid this in the event of a common currency additional resources will be required. Moreover, the efficient functioning of the EEU per se is also dubious.

Ofelya Sargsyan

Ofelya Sargsyan M.A. (AUA Yerevan), M.A. (Univ. Flensburg) is Junior Editor with European Union Foreign Affairs Journal (EUFAJ) and a Political Analyst with LIBERTAS – European Institute GmbH.

 

[1]Rilka Dragneva & Kataryna Wolczuk, Russia, the Eurasian Customs Union and the EU: Cooperation, Stagnation or Rivalry?, Russia and Eurasia Programme,  Chatham House, Briefing Paper, August 2012, p. 4, http://www.chathamhouse.org/sites/default/files/public/Research/Russia%20and%20Eurasia/0812bp_dragnevawolczuk.pdf.

[2] Aleksandra Jarosiewicz, Ewa Fischer, cooperation: Tomasz Bakunowicz; The Eurasian Economic Union – more political, less economic, Centre for Eastern Studies NUMBER 157,  20.01.2015, p. 1-7

[3]TASS Russian News Agenccy, (Информационное телеграфное агентство России (ИТАР-ТАСС), Putin instructed the Central Bank and the Government to work out the possibilities of creating a monetary union in the EEU (Путин поручил ЦБ и кабмину изучить возможность создания валютного союза в ЕАЭС), March 10, 2015, http://tass.ru/ekonomika/1817884,

Radio Azatutyun, Armenia Not To Attend Meeting Of Trade Bloc Partners, March 18, 2015, http://www.azatutyun.am/content/article/26891807.html

Naviny.by, Putin instructed to work out the possibilities of creating a monetary union in the EEU (Путин поручил проработать вопрос о создания в рамках ЕEU валютного союза); March 18, 2015, http://naviny.by/rubrics/finance/2015/03/10/ic_news_114_455255/

Читать полностью: http://naviny.by/rubrics/finance/2015/03/10/ic_news_114_455255/

[4]Banknoteinfo.net, Eurasian Economic Union plans to adopt common currency unit , August 13, 2014, http://banknoteinfo.net/eurasian-economic-union-plans-adopt-common-currency-unit/

[5]East Time, Introduction of Altyn will Be Useful for a Eurasian Union, Tuesday, May 13, 2014, http://easttime.info/news/kazakhstan/introduction-altyn-will-be-useful-eurasian-union

[6]Pravda-TV.ru, By Putin’s instruction a common currency of the EEU  will be launced  in 2016: Altyn or Euraz? (Единая валюта ЕАЭС по поручению Путина появится в 2016 году: «алтын» или «евраз»?) http://www.pravda-tv.ru/2015/03/10/129883

[7] Asbarez.com, ‘No Plans Yet’ for Armenia to Adopt Single EEU Currency, March 11, 2015, http://asbarez.com/132864/%E2%80%98no-plans-yet%E2%80%99-for-armenia-to-adopt-single-eeu-currency/

[8]News.am, Economist: Armenia will benefit from Eurasian Economic Union single currency, March 13, 2015, http://news.am/eng/news/256734.html

[9]News.am, Armenia economist: EEU single currency is foolish, March 14, 2015, http://news.am/eng/news/257002.html

[10]Mariam Grigoryan, 1am, (The approach to the single currency of the Eurasian Union is ambiguous in Belarus and Kazakhstan) Բելառուսում և Ղազախստանում միասնական արժույթի վերաբերյալ կարծիքը միանշանակ չէ, March 14, 2015, http://www.1in.am/1572943.html

[11] Before the Euro has been introduced as cash currency in 2002, it had been at disposition as book-money, on bank accounts only, since 1999.

[12] Hans-Jürgen Zahorka, Strategy Options for Central Asian Integration –For a Central Asian „Cecchini Report”, EUFAJ 1 / 2010, p. 116,  www.eufaj.eu

[13]Interpolit, Oil altyn against the dollar banknote (Нефтяной алтын против бумажного доллара);  11.03, 2015, http://politobzor.net/show-47317-neftyanoy-altyn-protiv-bumazhnogo-dollara.html

[14] Russian Telegraphic Agency (Русское Телеграфное Агентство), „Instead of the ruble – Altyn. Eurasian Economic Union opts into a new currency (Вместо рубля – алтын. Евразийский союз переходит на новую валюту), March 12, 2015, http://www.riata.ru/ekonomika/item/716-vmesto-rublya-altyn-evrazijskij-soyuz-perekhodit-na-novuyu-valyutu.html

 

Ein Gedanke zu “The Eurasian Economic Union’s Plans for a Common Currency: Altyn or Euraz?

Kommentar verfassen

Trage deine Daten unten ein oder klicke ein Icon um dich einzuloggen:

WordPress.com-Logo

Du kommentierst mit Deinem WordPress.com-Konto. Abmelden /  Ändern )

Google Foto

Du kommentierst mit Deinem Google-Konto. Abmelden /  Ändern )

Twitter-Bild

Du kommentierst mit Deinem Twitter-Konto. Abmelden /  Ändern )

Facebook-Foto

Du kommentierst mit Deinem Facebook-Konto. Abmelden /  Ändern )

Verbinde mit %s