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Russian Warns Against Relying on Dollar
Natalia Kolesnikova/Agence France-Presse — Getty Images
Russian President Dmitry A. Medvedev delivers the opening address at an economic forum in St. Petersburg.
Published: June 5, 2009
ST. PETERSBURG, Russia — President Dmitri A. Medvedev, who rarely misses a chance to accuse the United States of causing the global financial crisis, told an economic forum on Friday that wobbly American financial policy had made the dollar an undesirable currency for reserves held by central banks.
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Video Medvedev on Russia's Economy, Part 2
<H2></H2>Russia, along with China and other nations, has floated the idea of forming a supernational currency to supplant the dollar, perhaps using the so-called special drawing rights units of the International Monetary Fund as a basis.
Given the weaknesses in the American economy, Mr. Medvedev said, relying on the dollar as extensively as is the case today could mean building a postcrisis financial system on legs of clay. Banks should look also at regional currencies, like the ruble, he said.
Wresting some control of the world’s financial architecture from the United States is a theme often raised by Russia, and even more so during the global recession. Russian authorities’ comments on the issue have at times helped depress dollar exchange rates with other currencies because of concerns that central banks would dump the currency. But independent economists generally dismiss Moscow’s position — and the offering of the ruble as a reserve currency — as highly unrealistic, particularly given the wobbly recent history of the ruble.
“The artificial and monopolar support of a monopoly on key segments of the world economy became the fundamental cause of the crisis,” Mr. Medvedev said in a keynote address to the St. Petersburg Economic Forum, an annual opportunity for Russian authorities to lay out their economic policy thinking and court foreign investors.
With the recent upswing in oil prices and Russian stock markets, investor interest has returned to the country, and dozens of chief executives and more than 200 portfolio investors attended the gathering here this week.
As Russian officials have before, Mr. Medvedev laid blame for the global recession on what he characterized as “one center of consumption, which is financed by deficit, and correspondingly, an accumulation of debt, one reserve currency that is powerful as never before, and one predominating system of evaluating risks and assets.”
In other words, the United States.
Still, in a nod to Russia’s role as one of the world’s 20 largest economies, whose leaders have met to coordinate a response to the downturn, Mr. Medvedev also struck a constructive note, saying that all governments had reacted well to the crisis.
He praised the ability of governments to “work in concert” to put the brakes on downward trends. Policy makers, he said, are torn between an approach that would largely conserve the current global regulatory regime, and an overhaul that could interfere with recovery but reduce the likelihood of future crises.
Mr. Medvedev suggested that Russia would like to see more substantive change — including an end to such an oversize role for the dollar.
Russia’s economic critique of the dollar, continuing for several years, comes alongside increased political tensions with the United States.
Yet Russia’s central bank, too, keeps about 50 percent of its reserves in dollars.
To stabilize exchange rates, Mr. Medvedev said, governments should create a new reserve currency. Russia has backed an expanded role for special drawing rights units of the International Monetary Fund.
Authorities in Moscow also took steps to push countries to hold rubles as a reserve by encouraging trade in Russian oil and natural gas to be denominated in rubles, rather than dollars, as is the case now. But trading partners have preferred contracts in dollars.
Natalia Kolesnikova/Agence France-Presse — Getty ImagesRussian President Dmitry A. Medvedev delivers the opening address at an economic forum in St. Petersburg.
Published: June 5, 2009
ST. PETERSBURG, Russia — President Dmitri A. Medvedev, who rarely misses a chance to accuse the United States of causing the global financial crisis, told an economic forum on Friday that wobbly American financial policy had made the dollar an undesirable currency for reserves held by central banks.
Video Video Medvedev on Russia's Economy, Part 2 <H2></H2>Russia, along with China and other nations, has floated the idea of forming a supernational currency to supplant the dollar, perhaps using the so-called special drawing rights units of the International Monetary Fund as a basis.
Given the weaknesses in the American economy, Mr. Medvedev said, relying on the dollar as extensively as is the case today could mean building a postcrisis financial system on legs of clay. Banks should look also at regional currencies, like the ruble, he said.
Wresting some control of the world’s financial architecture from the United States is a theme often raised by Russia, and even more so during the global recession. Russian authorities’ comments on the issue have at times helped depress dollar exchange rates with other currencies because of concerns that central banks would dump the currency. But independent economists generally dismiss Moscow’s position — and the offering of the ruble as a reserve currency — as highly unrealistic, particularly given the wobbly recent history of the ruble.
“The artificial and monopolar support of a monopoly on key segments of the world economy became the fundamental cause of the crisis,” Mr. Medvedev said in a keynote address to the St. Petersburg Economic Forum, an annual opportunity for Russian authorities to lay out their economic policy thinking and court foreign investors.
With the recent upswing in oil prices and Russian stock markets, investor interest has returned to the country, and dozens of chief executives and more than 200 portfolio investors attended the gathering here this week.
As Russian officials have before, Mr. Medvedev laid blame for the global recession on what he characterized as “one center of consumption, which is financed by deficit, and correspondingly, an accumulation of debt, one reserve currency that is powerful as never before, and one predominating system of evaluating risks and assets.”
In other words, the United States.
Still, in a nod to Russia’s role as one of the world’s 20 largest economies, whose leaders have met to coordinate a response to the downturn, Mr. Medvedev also struck a constructive note, saying that all governments had reacted well to the crisis.
He praised the ability of governments to “work in concert” to put the brakes on downward trends. Policy makers, he said, are torn between an approach that would largely conserve the current global regulatory regime, and an overhaul that could interfere with recovery but reduce the likelihood of future crises.
Mr. Medvedev suggested that Russia would like to see more substantive change — including an end to such an oversize role for the dollar.
Russia’s economic critique of the dollar, continuing for several years, comes alongside increased political tensions with the United States.
Yet Russia’s central bank, too, keeps about 50 percent of its reserves in dollars.
To stabilize exchange rates, Mr. Medvedev said, governments should create a new reserve currency. Russia has backed an expanded role for special drawing rights units of the International Monetary Fund.
Authorities in Moscow also took steps to push countries to hold rubles as a reserve by encouraging trade in Russian oil and natural gas to be denominated in rubles, rather than dollars, as is the case now. But trading partners have preferred contracts in dollars.
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