Russian businessmen might lose their interest in American dollar
The panic in the Russian society concerning the growth of the euro rate and the “shameful” devaluation of American dollar has reached its peak. Senior statesmen have to release public statements in order to calm people down. Vice Prime Minister of the Russian government Aleksey Kudrin (he also takes the position of the Finance Minister) had to confess that the growth of the euro rate resulted in the losses of $400 million dollars for the Russian budget. Kudrin added that this money was also added to the sum of Russia’s foreign debt. However, Aleksey Kudrin is certain that Russia will not suffer from this excessive spending.
By the way, Aleksey Kudrin has a very hard goal to pursue. He is Russia’s major reformer at the moment. He is the secretary of the whole government too. Therefore, Kudrin has to explain that to everyone, from President Putin to Prime Minister Kasyanov, that the situation with money is fine in the country, even when the situation is far from being fine. We have to say that Aleksey Kudrin has been good at that so far. His optimism is probably a great help to him.
Aleksey Kudrin is an optimistic person indeed. For example, pessimistic people expect trouble after trouble from the sudden growth of the euro rate. They wait for everything, including hysterical inflation expectations. Kudrin does not expect anything like that. Russian people are disposed to mass hysteria (everyone was longing to get their devaluated bank deposits back after the crisis of 1998), although it is not scary for the Russian budget. The finance minister is certain that the growth of the euro rate vs. US dollar on the world currency market does not bring considerable damage to the Russian economy. Just a little bit, maybe.
“There will be no inflation outburst in the year 2003,” assures Kudrin. One shall assume that he isolated Russia’s state budget both from Russia itself and from the Russian people. The vice prime minister believes that the reduction of the dollar rate is connected with the fact that the American economy experiences a recession, which turned out to be more serious than was actually expected. A lot of economists were sure that the economic growth in the USA was supposed to stop one day after 15 years of constant progress. However, very few people believed that the setback would become such an expressive stupor. “America has a bit more of negative things in its economy in comparison with Europe. I do not think that the growth of the euro rate is connected with a greater role that this currency might play in the world economic order,” Finance Minister Aleksey Kudrin stated regarding the continuing devaluation of the American currency.
In Kudrin’s words, currency rate fluctuations inevitably bring certain changes to the financial policy of a state: “Of course, our foreign debt payments to Europe will become more expensive because of that. On the other and, we take our export tariffs in euros. In addition to that, the reduction of dollar vs. ruble creates favorable climate for home exporters that are interested in American markets,” said Kudrin. It stands the reason that Russian exports like an American dollar strong and heavy. If a dollar is weak, the export instinct of the Russian business gets weaker as well. The Russian business will start liking euro, which becomes heavier and heavier.
Aleksey Kudrin did not conceal that fact. He put that straight: “This is the process of reorientation on the joint European currency.” This process is rather slow, and the present amount of the euro cash is not enough. That is why an American dollar is still the most popular way of saving money in Russia. One shall assume, when the Russian people convert their dollar savings in euro, they will lose their interest in the fate of the American currency. Although, the dollar rate might grow again, but this is not really likely. Aleksey Kudrin is certain that there will be no considerable changes on the currency market in the nearest future. If political affairs do not change that, of course. We have the president in charge of politics. Kudrin is in charge of financial affairs.
Translated by Dmitry Sudakov