Moscow News
http://www.mnweekly.ru/
February 28, 2008
Bucks Stop Here
By Rebeccah Billing
It's stable, liquid, portable, anonymous and secure. For decades Russians have trusted the U.S. dollar as a safe asset in an unpredictable world. But it seems that Russians are increasingly putting their faith in a new currency; the old-world's euro.
Sales of the euro in Russia have risen steadily since the currency's introduction in January 2002, reaching an all time peak during the festive season last year; sales of euros in December 2007 amounted to over €2 billion (about $3 billion) according to figures from the Central Bank of Russia (CBR). This represents an increase of 32 percent compared with euro sales in November, where as sales of USD rose just 9 percent over the same period.
"We are observing a trend of dedollarization," comments Artyom Arkhipov, a macro economist for Gazprombank.
"This trend has been going on for several years. We see that people are exchanging their dollars for euros for two reasons; first of all Europe is closer to Russia than the USA, so euros can be spent more readily. And secondly the dollar is depreciating."
Last year the dollar slipped from 26.53 rubles to 24.55 rubles over the course of the year, while the euro gained over a ruble in value from 34.39 rubles to 35.93. This growing disparity between the two currencies has lead many savvy savers to switch their money from dollars to euros. Although, many more Russian are putting their faith in their own currency:
"Around 14 percent of deposits in Russian banks are in foreign currencies, which is really rather low," comments Natalia Orlova chief economist at Alfa Bank.
"Most account savings are denominated in our domestic currency and most contracts are now signed in rubles, even real estate prices." she continues.
The situation contrasts sharply with figures from six years ago, when 38 percent of savings were kept in foreign currencies. Surveys from the Public Opinion Foundation reveal that while in 2002, 35 percent of Russians surveyed trusted the dollar more than either the ruble or the euro, the fell to just 5 percent in a January 2007 survey. The 2007 survey also found that two-thirds of respondents who had used USD had not used the currency within two to three years.
These findings reflect a global trend; according to calculations of the UK's Financial Times the value of euro notes in circulation overtook the value of dollar notes in October 2006 to become the world's favorite form of cash.
However, the dollar remains the world's major international reserve currency with an accumulation more than double that of the euro, according to figures from the International Monetary Fund. As the world's "petrocurrency" the dollar also retains particular significance for Russia; 63 percent of Russia's exports are oil, and further 15 percent are metals, also priced in dollars.
"In Russia the euro is limited to travel-money and small amounts for personal use," explains Orlova.
"It has not yet become an extremely important currency in the economy, we are still doing most of our calculations in dollars. And while Russia's exports remain so focused on commodities the dollar will remain important," she concludes.