Kremlin nurtures rouble with ban on the mighty dollar: Curbs designed to bolster local currency and cut inflation

WHEN shops in Russia reopen tomorrow, customers will find they can no longer spend 'green' but only 'wooden' money. A law designed to strengthen the rouble bans cash transactions in the US dollar, which used to be held only by black-marketeers but which, because of inflation, has become practically a parallel currency.

'What shall I do?' said Igor. 'I've earned 500 dollars painting walls for foreigners. It's useless to me now.' In fact, Igor can save the money, perhaps for some foreign trip, as Russians may now legally possess dollars. Or he can change it at the bank at a rate of one dollar to 1,250 roubles. The Central Bank hopes Russians will do the latter, making the rouble more valuable. But another possibility is that the law's rouble-enhancing effects will be cancelled by shops encouraging more credit-card purchases to help them pay for goods they import for hard currency. Credit-card bills will still be in dollars.

Once Russians realise there is no cause for panic, they may welcome the new law. The Soviet Union operated a system whereby only foreigners could escape the inferior Russian shops by using hard-

currency stores. Then Russians with dollars were allowed in but this offended the estimated 40 per cent of the population who did not and still do not have foreign money.

Recently Russians have been allowed to use roubles in hard-currency shops but because the local money has been so weak, they have needed a suitcase-full of cash to buy a can of cola and a packet of cornflakes. Now large-denomination rouble notes have been printed and rouble shopping in stores with Western goods becomes realistic for the first time.

Internal rouble convertibility (the currency is still not accepted abroad) has been made possible by the relative success of the reformist government's tight monetary policy. According to the Finance Minister, Boris Fyodorov, there was only a ninefold increase in prices last year compared with 1992, when costs rose 26 times. But hyperinflation still threatens, he says, if the government, in panic at the success of the far-right in December's elections, starts spending more than the country can afford on the state sector.

Yesterday there were hints the government might be about to do just that. Rossiiskiye Vesti newspaper said it had heard President Boris Yeltsin, who has said the reformers will stay, was preparing to reduce their influence and promote men more sympathetic to the ideas of financing industry to stimulate local production and of strengthening social welfare. Mr Fyodorov, now a deputy prime minister, would be demoted, and the radical economist Yegor Gaidar, while keeping his title of deputy prime minister, would have to report to Oleg Soskovets, an industrialist who improved his political standing by bringing a hijack drama to an end without loss of life over Christmas. Mr Fyodorov has said he will quit if reforms are watered down. Yesterday he was quoted as saying Russia could end up like Ukraine, which is in economic chaos, if it did not keep taking its monetarist medicine.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Tradewind Recruitment: Phase Co-ordinator for Foundation and Key Stage 1

Negotiable: Tradewind Recruitment: Phase Co-ordinator for Foundation and Key S...

Tradewind Recruitment: SEN Teacher

Negotiable: Tradewind Recruitment: SEN Teacher We have a fantastic special n...

Tradewind Recruitment: History Teacher

Negotiable: Tradewind Recruitment: My client is an 11-18 all ability co-educat...

Tradewind Recruitment: Year 6 Teacher

£100 - £150 per day: Tradewind Recruitment: Year 6 Teacher Birmingham Jan 2015...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee