Newspaper article The Christian Science Monitor

Two Former Republics Drop Soviet-Era Ruble Moscow's Conditions for Joining Zone Called Too Stringent

Newspaper article The Christian Science Monitor

Two Former Republics Drop Soviet-Era Ruble Moscow's Conditions for Joining Zone Called Too Stringent

Article excerpt

THE former Soviet republics of Kazakhstan and Uzbekistan have taken their first steps toward economic independence from Russia by dumping the increasingly worthless Soviet-era ruble and introducing their own currencies.

Both countries, which had been using pre-1993 Soviet rubles that are no longer valid in Russia, had attempted over the past two months to reach an agreement with Moscow on sharing the ruble as part of a six-nation ruble zone.

But in a joint statement last week, the presidents of the two nations said they had been prompted to issue their own currencies because Moscow had set unrealistic terms for joining the zone, the ITAR-Tass and Interfax news agencies reported.

Uzbek Deputy Prime Minister Baktiar Hamidov said earlier that Russia was "enslaving" the central Asian states with its tough demands for economic policy control, according to Interfax.

Russia has in recent weeks adopted a stance requiring the five nations that were to make up the zone - Kazakhstan, Uzbekistan, Tajikistan, Belarus, and Armenia - to transfer their gold and hard-currency reserves to Russia as collateral for using new Russian bank notes.

Analysts say the harsh stance was the result of a split in the Russian government between reformers who place a priority on economic reforms, and old-style politicians who put a higher premium on preserving Russia's role as de facto head of the crumbling post-Soviet political empire.

The stance evidently toughened in favor of the economists, who saw increased monetary ties with the former Soviet republics as more of a burden.

Headed by Finance Minister Boris Fyodorov, the reformers have warned that a ruble zone would fuel Russia's inflation rate and could threaten the ruble's stability because the other countries have disparate tax, customs, and monetary policies.

"Russia has political interests as well as economic interests. They are the preservation of the Commonwealth and the preservation of the zone of Russian influence," Armenian President Lev Ter-Petrosian said in an interview last week in the Armenian capital, Yerevan.

"Maybe now Russia is free from that and concerned only with economics. But I don't think Russia can completely refrain from {exercising} its political ambitions," he warned.

Russian Central Bank Chairman Viktor Gerashchenko, a staunch proponent of the zone, now admits that Russia's economy can be run more smoothly without it. He says the zone would have worked only if the five nations had become so economically subordinate to Moscow that their banks were branch offices of his bank. …

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