Russia Won’t Diversify Currency Reserves, Kostin Says
Russia is unlikely to change the structure of its reserves from dollars and euros even as currencies including the yuan gain more importance in regional trade, VTB Group Chief Executive Officer Andrei Kostin said.
“Inevitably with the growth and importance of other economies like China or other BRIC countries’ economies, the role of their currencies should be more important,” said Kostin, who heads Russia’s second-biggest bank, in an interview yesterday in Singapore. “We think that the yuan and the ruble can be currencies in which we conduct bilateral trade. But as a reserve currency, I think the central bank is still dividing mainly between the dollar and the euro.”
The ruble gained 0.2 percent against the euro to 42.8600, the strongest level in almost ten months, at 1:12 p.m. in Moscow. The Russian currency was little changed against the dollar.
Russia has sought to promote regional currencies in trade and finance to reduce the risks posed by the dominance of the dollar. Medvedev has blamed the global financial crisis on an over-reliance on the U.S. currency and the U.S. role in the financial system.
“Things are changing for sure and I think the crisis showed the weaknesses of being dependent on only one currency,” said, Kostin who was accompanying President Dmitry Medvedev at the Asia-Pacific Economic Cooperation forum. ‘There is more concern among many investors, even in Russia, that America is printing too much money and that could devalue it.”
State-run VTB is Russia’s second-biggest bank after OAO Sberbank.
Border Arrangements
Prime Minister Vladimir Putin traveled to China last month to strengthen a relationship forged by Russian oil exports to Asia’s largest energy consumer. The total value of oil deals signed with Chinese companies this year is about $100 billion, according to the Russian government.
China, the world’s fastest-growing major economy, has signed 650 billion yuan ($95 billion) in currency-swap agreements since December with Argentina, Belarus Hong Kong, Indonesia, Malaysia and South Korea, encouraging greater use of its currency guaranteed online payday loans.
Russia already has agreements that allow the use of the ruble and yuan in cross-border trade, First Deputy Central Bank Chairman Alexei Ulyukayev said on Oct. 23. Russia is also in talks with India and Brazil to use their currencies in trade.
Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said today that the yuan may in future be added to the basket of currencies that set the value of IMF monetary units, called special drawing rights.
Reserve Currency
The yuan may be added in a “while,” Strauss-Kahn said at a press briefing in Beijing today. The move would require the currency to be market-based, he said.
While Chinese officials, including central bank Governor Zhou Xiaochuan, have called this year for an alternative to the dollar as the main reserve currency, they maintain controls on the yuan that prevent it for now from becoming a competitor.
Leaders from the APRC, who met in Singapore over the weekend, declined to back U.S. calls for a stronger yuan.
It’s “not easy” to say when the yuan could become convertible, Kostin said.
The currency could become a global reserve currency in about 10 years should the country make it convertible, Russian Finance Minister Alexei Kudrin said on Oct. 24.
While the yuan cannot be freely exchanged, making it impossible to use it for reserves at present, a change in policy would make the currency a “notable and weighty” global reserve currency given China’s trade volumes with others, Kudrin said.
Russia’s reserves, the world’s third largest holdings, are made up of 47 percent dollars, 41 percent euros, 10 percent pounds and 2 percent yen, Ulyukayev said on Nov. 2.