Gold Is Trotted Out As Russia's Savior
Proposals Hint at Return to Old Standard
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Agence France-Presse
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MOSCOW - With the ruble discredited and vulnerable, Russian authorities have begun to float radical proposals to put gold back at the heart of the national economy, using reserves to underpin and even partly replace the flagging domestic currency.
Well aware that printing rubles to finance a growing budget deficit will further undermine the currency, officials have introduced several ideas, one of which involves minting a bullion coin that would literally be worth its weight in gold.
Some analysts have cautiously welcomed the mobilization of gold to defend the ruble. But others warned that the move would not provide a long-term solution for Russia's predicament.
The problem for the government revolves around the huge discrepancy between the amount it plans to spend and the funds it can realistically bring in. Prime Minister Yevgeni Primakov's government plans to spend 130 billion rubles ($7.67 billion) in the fourth quarter, having pledged to pay off back wages and keep up with foreign-debt repayments. Income, however, is penciled in at just 70 billion rubles.
As Moscow has shattered the trust of borrowers with its debt default in August, its options for financing the deficit are painfully limited. Although an International Monetary Fund mission was in Moscow on Wednesday for talks with government officials, analysts have said further loans are unlikely to emerge, at least this year.
Against this inauspicious background, the government has increasingly referred cryptically to ''mobilizing internal reserves'' to break its financial vicious circle.
A regional governor suggested early this month that Russia return to the gold standard and reintroduce the 1920s-vintage ''golden ruble,'' under which the Russian currency would be tied to the central bank's gold reserves. Some analysts have scoffed at this option.
''The gold standard went out in the 1930s, and I don't think a single country can go back,'' said a London-based gold specialist, Tim Green. ''It's not a good idea.''
But the gold-standard idea has since given birth to another. Last weekend, a senior official from Gokhran, the state precious-metals repository, said plans were advancing to use gold and silver reserves to mint new coins.
The mint, the argument runs, would help authorities pay off the wage backlog without inflationary money-printing and would restore trust in a ruble-denominated store of value. The central bank has yet to declare its position on the coin issue, but many economists are skeptical.
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