NEW RUBLES NOT DELIVERED TO CHECHNYA.

Aburashid Zakaev, president of Chechnya’s National Bank, told the Russian press on January 5 that the new, redenominated rubles, whose introduction in the rest of Russia began on January 1, had not been supplied to Chechnya. (Russian agencies, January 5) While this may be nothing more than a reflection of the difficulties the Russian authorities face in conducting financial relations with Grozny, Moscow’s failure to supply the breakaway region with the new currency could have serious unintended consequences for relations between Russia and Chechnya. In particular, the Russian authorities inability or unwillingness to provide Chechnya with the same fiduciary instrument in use elsewhere in Russia could have the effect of pushing Chechnya towards monetary independence.

As was demonstrated by the monetary reforms carried out in many Soviet successor states during 1992-1993, monetary independence is a powerful economic and political statement. In political terms, movement towards the introduction of a national currency can underscore a country’s national identity and sovereignty; in economic terms, a national currency gives the country the ability to conduct independent monetary and fiscal policies.

Zakaev’s interview does not suggest that Chechen bank officials are thinking in these terms; instead, Zakaev emphasized maintaining a working relationship between the Russian and Chechen financial authorities. He also said that new rubles were in any case being brought to Chechnya by Chechen traders who sell their wares in neighboring Dagestan and Kabardino-Balkaria, where the new rubles have been introduced. Likewise, the new and old rubles are to circulate in a parallel fashion until the end of 1998 throughout the Russian Federation; and citizens will be able to exchange old for new rubles through the year 2002.

Still, Moscow’s hesitation to introduce the new rubles in Chechnya, should it continue, suggests that the old rubles could continue to finance the Chechen economy while they are disappearing from the rest of the Russian Federation. In addition to further differentiating the Chechen financial system from that of other federation subjects, this failure to deliver the new rubles could leave Grozny short of the cash it demands to finance the Chechen economy. If so, the Chechen National Bank might be tempted to follow in the 1992-era footsteps of Ukraine and other CIS countries and introduce additional liquidity in the form coupons or other monetary units that would circulate alongside the old and new rubles. Such a development, should it occur, could be a major step towards the introduction of a genuine national currency, and from there, to economic independence for Chechnya.

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