FX Week: «Rouble convertible by July — Putin»

MOSCOW — Russian president Vladimir Putin wants to make the Russian rouble a convertible currency by July 1 this year, he said last week.

Speaking at his annual address to the Russian parliament, the Federal Assembly, on May 10, he said he would speed up the removal of the remaining restrictions to enable the currency to be freely traded by July. «Making the rouble genuinely convertible depends in great part on its attractiveness as an instrument for settlements and savings,» he said. «In this respect we still have a great deal of work to do. In particular, the rouble must become a more universal means for carrying out international settlements and should gradually expand its zone of influence.»

Back in 2003, Putin set the original goal of making the rouble convertible. Since then, authorities have introduced a number of measures to boost the currency’s reputation globally such as creating a symbol for the unit (FX Week, February 20).

Putin said Russia needs to set up domestic markets for trading oil, gas and other goods that carry out their transactions in roubles. «Our goods are traded on world markets, but why are they not traded here in Russia? The government should speed up work on settling these issues.»

Igor Souzdaltsev, project manager at Investsberbank Moscow and president of ACI Russia, welcomed the announcement. «Speeding up the removal of restrictions on capital operations, making the rouble a reserve currency, and trading of oil and natural gas in Russia for roubles, will strongly support the development of Russian financial markets,» he said. «These decisions will lead to a further de-dollarisation of Russia and strengthening of our national currency. This will lead demand for roubles to grow rapidly worldwide.»

Gabriel Kadasi, emerging market analyst at Informa Global
Markets in London, agreed, saying Russia is one of the most
promising emerging markets, with strong medium-term growth
prospects. «Easier access to its financial markets will bring new
investors and boost trading volumes,» he told FX Week. «However,
it remains questionable how Moscow will deal with all the
pressure on the rouble appreciation. The central bank keeps
printing roubles to drain the windfall petrodollar inflows to
protect its currency from excessive firming.»