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Financial Times (UK)
December 12, 2001
Russians in a pickle over arrival of the euro
By Andrew Jack in Moscow
Russians traditionally carry out a high proportion of their purchases in cash. Wary after repeated government monetary manipulations and banking frauds, many prefer to keep their savings in cash, tucked away in pickle jars or under their beds.
By all accounts most of those savings are in dollars, but in the next few days, there may be a palpable rush for those jars, as the message is beginning to get through that Deutschmarks, Finnish markka and other euro-connected currencies are about to be withdrawn from circulation.
Tuesday was officially "euro day" in Russia, representing the culmination of weeks of work by the European Commission in trying to raise awareness of the single European currency ahead of the launch of euro notes and coins on January 1 2002.
Some 175,000 leaflets and 35,000 posters have been printed; a travel guide to the 12 eurozone countries published; "euro stands" set up in shopping centres; and television advertising spots planned for the end of the year.
But in spite of the fact that the European Union represents one of Russia's most important export markets, and considerable quantities of eurozone banknotes are currently in circulation within the country, the countdown has been met with widespread apathy in Russia, and even contradictory and hostile reactions from officialdom.
The stakes are high. An estimated 35 per cent of Russia's trade is currently with EU countries, and that is expected to rise to 50 per cent with EU enlargement in the next few years. Yet Russia's transactions and official reserves in eurozone currencies appear to remain modest.
Two years ago a report, by the Institute of Europe at the Academy of Sciences in Moscow, warned there was an "unjustifiably disproportionate" reliance on the dollar compared with its role in Russian trade and its global importance. That could risk destabilising the domestic economy and pose "a real threat to the country's security".
No one knows how much eurozone currency is in Russia, with estimates of up to $1bn-$2bn in total, but there are fears that indivi duals holding this cash will find it difficult to exchange after the start of next year, or that exchange booths will exact high commissions for doing so.
That is one reason why, among the euro-adjacent countries, Russia has been allocated a disproportionate part of the European Commission external euro educational budget - E53,000 ($47,000).
At a euro conference in Moscow on Tuesday, Andrei Kazmin, head of the state-controlled savings bank Sberbank, which holds four-fifths of Russian retail deposits, warned that even his institution might not be ready for euro cash transactions by January 1.
Like several of his colleagues, he pointed the finger of blame indirectly at the Russian Central Bank, which has yet to make final approvals allowing the state customs committee to release euro banknotes to the country's commercial banks.
The central bank has been busy distancing itself in the last few days from reports in the local media that it has been advising Russians to avoid changing currency into euros for the coming year because of the risk of being stung with counterfeit notes.
European diplomats have privately been concerned for some time at the apparent lack of preparations being made by the central bank, which refuses to provide any information on what proportion of its own reserves, let alone the money held by Russians, are held in European currencies.
Alexei Kudrin, the finance minister, bemused the audience at Tuesday's conference with a suggestion that up to 20 per cent of Russia's reserves were held in euro currencies.
Tatiana Paramonova, the central bank's deputy governor, went on to argue that a tenth of its reserves were denominated in euros. That appeared to contradict previous statements by Viktor Gerashchenko, the governor, that more than 92 per cent of the Central Bank's reserves were held in dollars.
There was no clarity from the central bank's traditionally uncommunicative press office. It said on Tuesday that all such information was a state secret.
Mr Gerashchenko said last week that his institution took a purely pragmatic view and that its split in reserves simply reflected the relative volumes of currencies that were traded at present, although he anticipated there would be a gradual shift to the euro over time.
He was set to provide a little clarity on Tuesday night, as one of the leading Russian figures attending a 350-person musical and culinary euro gala. The price? E400.
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