Russia's fiscal hawk reins in currency ambitions

ST PETERSBURG, Russia – The finance minister pulled back on Russia's aspirations for the ruble to emerge as a regional reserve currency in the near future, saying Saturday it would likely first happen in China.

In a deviation from the bullish line of the Russian government, Alexei Kudrin said the world could not simply create a new reserve currency by agreement, and there would need to be much greater integration of economic policies before this could happen.

"I don't think any new unions of currencies will appear any time soon," he told delegates at an investment forum in St. Petersburg, Russia's northern capital. "The shortest way toward this would be for China to liberalize its economy and allow the convertibility of the yuan."

"This may take 10 years," he said. "But after this there will be a demand for this currency, and this will be the shortest way to create a new global reserve currency."

Russia has repeatedly called for a supranational currency to replace the dollar as the main reserve currency to bring more stability to the global economy. President Dmitry Medvedev said Friday in an interview with leading business daily Kommersant that the ruble could become more popular as a reserve currency if Russia's trading partners start paying for oil in rubles.

But Kudrin — who has often deviated from the government's more optimistic line on the economy — warned that Russia and even its closest neighbors in the former Soviet Union would have to bring their laws and policies in line with each other before developing a regional currency.

First Deputy Prime Minister Igor Shuvalov supported Kudrin's stance.

The ruble as a reserve currency can become a "potential reality in the short term" only for some Ex-Soviet nations, Shuvalov told a news conference. He reiterated that Russia "does not want to impose the ruble" as a reserve currency on anyone with "the political talk."

Economists have said Russia's ambitions appear unrealistic given the devastating effect the global crisis has had its economy and on the ruble, a currency that is closely linked to oil prices.

in Bulgaria. AP