Belarussian President Alexander Lukashenko (left), Kazakh President Nursultan Nazarbayev (center), Russian President Vladimir Putin on March 20, 2015. Photo courtesy of The Russian Presidential Press and Information Office.
Russian President Vladimir Putin is proposing the creation of a regional “Eurasian” currency union with Belarus and Kazakhstan, Russia’s main partners in the Eurasian Economic Union.
Putin’s proposal was made during a meeting on Friday with the Belarussian and Kazakh presidents which highlighted the growing challenges that face the Russian-led Eurasian Economic Union amid the tumble in the price of global oil and the decline of the Russian rouble.
“We agreed to continue coordinating our monetary policy. I think the time has come to discuss the possibility of creating a future currency union. Working shoulder to shoulder, it is easier to respond to financial and economic threats from outside and protect our common market,” Putin said following the meeting.
“Russian investment in the economies of Belarus and Kazakhstan now comes to $18 billion. Belarus and Kazakhstan have invested around $10 billion in Russia. More than 7,000 joint ventures have been established and are in operation,” Putin noted.
Aleksey Likhachev, Russian deputy minister of economic development, commenting to RT said that EEU countries can gradually integrate in the currency union.
“I would suggest moving step by step, exactly as all EU member states enter the eurozone, gradually creating all these common financial institutions,” Likhachev said, adding that if such an order comes from the member leaders, all the sides will immediately start negotiations.
Despite a wide range of benefits, trade within the EEU may be followed by certain risks, Likhachev believes. One of the main risks is that the absence of borders and the common market for service make trade extremely dependent on fluctuations in currency exchange rates, he said.
“That means any slightest fluctuation in national currencies of today’s four and of tomorrow’s five [Kyrgyzstan is about to join the EEU – Ed.] EEU countries, that are related neither to trade nor to demand, create a huge trade imbalance,” he said, adding that officials are looking for ways to smooth these problems out, and trade and industry institutions are in a constant dialogue.
“In the same enclosed space, where goods, services, capital and labor are constantly moving, the existence of different currencies exacerbates the risks,” Likhachev said. Apart from the economy, there are also political and social issues that are yet to be discussed, he added.
Following the meeting, Putin announced that in response to the oil price collapse and the difficult economic situation that a 2.3 trillion ruble anti-crisis program was put together in an effort to support the economy and social sector.
Putin also said that an additional trillion rubles will be injected to prop up the capital of Russia’s main banks and financial institutions with funding coming from reserve funds which include the National Welfare Fund.
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