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The Times (UK)
December 17, 2001
Russian ban on euro will cause havoc

THE arrival of the euro looks likely to cause havoc in Russia because of the failure by the country’s Central Bank to lift a ban on importing the currency, leaving millions of coins and notes stockpiling on the border.

Only now is Russia waking up to the prospect that from January 1 the German mark, a favourite currency of Russian business and tourism along with the US dollar, will cease to be legal tender. The mark is the only currency that will cease to be legal tender on the stroke of midnight on December 31. Although a special arrangement will enable German shops to continue to take the currency, its status in Russia is unclear.

One German bank, Commerzbank, has resorted to importing the euro in diplomatic bags — a breach of the Vienna Convention, which prohibits the bags being used for anything that is illegal in the receiving country — in order to get around the customs ban.

The Central Bank said last week that it would apply for an injunction, but has failed to do so. “This is messy co-ordination between the authorities,” Aleksei Zabotkin, chief economist at United Financial Group investment bank, said.

Even if the ban is lifted there may not be enough time to get the euro notes and coins to where they are needed.

Up to $30 billion in savings is believed to be in foreign currency kept by people at home, much of it held in marks.

Russia feels neglected in the European Commission’s campaign to raise awareness of the euro, even though it has been allotted a large slice of the Commission’s external euro educational budget — 53,000.

Exchange offices are wary of the new currency. “I won’t be taking euros until we have the means to check for counterfeits,” the manager of one in Moscow said. “I have no idea what a euro looks like.”

“The people who will really benefit from the euro are those who make the currency-exchange signs,” Steven Buscher, an American businessman based in Moscow, said. “There will be no major shifts in the short-term.”

European officials say that the euro will be cheaper to import than the dollar, but until the Central Bank has resolved the confusion on its country’s borders, Russia will not benefit from the new notes and coins until well into the new year.

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