Skip to: Content
Skip to: Site Navigation
Skip to: Search


Will Soviet Ruble Become Rubble?

By David R. Francis / October 11, 1991



JOHN WILLIAMSON doesn't claim to be a prophet. Ask for his predictions on the economic future of the Soviet empire and the reply is, "I don't know."But together with another economist, Oleh Havrylyshyn, Mr. Williamson has drawn up three possible scenarios: 1. Full economic independence. Some Soviet republics become new nations and establish all the economic attributes of nationhood. They have a separate currency, a separate financial system, customs regulations, and membership in such multilateral organizations as the International Monetary Fund (IMF) and the World Bank. There are no continuing fiscal ties to the old Soviet Union or its replacement. 2. Concentric circles of association. A core group of republics maintains a high degree of economic (but not necessarily political) unity comprising a monetary union and a common market, while other republics associate themselves by selecting from a menu of economic cooperation measures. Some might, for example, join the common market but not monetary union. 3. Essentially full economic union. This would involve a common market and a monetary union controlled by a single central bank. But it would allow republics the option to print separate currencies pegged to the ruble and controlled by the central bank. Republics could be politically independent or not. In a study for the Institute for International Economics in Washington, the two do not predict which scenario is most likely. It is also possible, they note, that some new nations arising from the ashes of the Soviet Union may decide to look west rather than east. The Baltics, for example, have already indicated a long-run interest in joining the European Community. That, however, isn't likely to happen anytime soon. So the two economists explore the possibility of early construction of an Eastern Econom ic Community, with the acronym EAEC, to avoid confusion with the European Economic Community (EEC). One reason for the study, Williamson explains, was to persuade Western governments anxious about economic disarray in the "former Soviet Union" not to insist on a single currency agreement. That's a special concern of Mr. Havrylyshyn, a native Ukrainian now teaching at George Washington University. Financial aid and probably the future economic shape of the Soviet Union are to be discussed today by the finance ministers of the Group of Seven major industrial democracies at a meeting in Bangkok. Aid could also come up at policymaking committee sessions of the IMF and the World Bank this weekend just prior to the joint annual meeting of these institutions. With the Soviet Union an associate member of the IMF as of last Saturday, a 17-member Soviet delegation, led by economist Grigory Yavlinsky, will be present to talk to this gathering of the world's top financial leaders. Mr. Yavlinsky is one of the key authors of the "Grand Bargain," an academic proposal calling for a large amount of Western aid in return for major Soviet reforms toward a free-market economic system. The 12-nation European Community on Monday promised $2.4 billion in aid to the Soviets to meet an expected winter food shortage. The offer is conditional on the United States, Canada, and Japan coming up with enough funds to make a $7 billion joint Western package of loans and credits. Aid beyond such an immediate package will depend on how fast Soviet talk of economic reform turns into real reform. "I would like to see more reforms," says Williamson. He and Havrylyshyn say it is essential to maintain trade links among the "ex-Soviet republics." They worry that the present breakdown of the Soviet monetary system threatens hyper-inflation and the spread of trade controls in the republics. So they want a restoration of monetary stability. But, they say, this could come either by a reestablishment of effective central control or by the adoption of independent currencies by the republics. When other empires tumbled in modern times, common currencies were abandoned. The Austro-Hungarian empire broke into national pieces. The former British and French colonies dropped "currency boards" that tied their monies to the pound and the franc. Williamson doubts that the ruble will remain a common currency in the breakup of the Soviet empire.

Skip to next paragraph