A Western-Backed Ruble for Russia

To simultaneously establish monetary credibility and a stable price environment, Russia and the G-7 countries should forge a new monetary agreement. The Western nations would then create and print a new currency with guaranteed convertibility to replace the existing Russian rubles. The Russian authorities would agree to cooperate by relinquishing control over the issue of currency until the currency became well established. An obvious candidate currency would be some variant of the Special Drawing Right, the present International Monetary Fund accounting unit which is comprised of a fixed basket of the major convertible currencies. This new currency would be exchanged for the existing currency (cash) holdings of individuals and enterprises, with additional amounts to serve as reserves for commercial banks. Bank deposits would be transformed into Special Ruble (SR) accounts at the exchange rate determined at the time of the currency swap. The amount of SRs supplied would be a fixed amount of SRs based on ruble currency stocks as of a certain date. Since the SR would be a joint issue of all the sponsoring countries, the total costs would be quite minor in view of the gravity of the situation in Russia.