Russian President Dmitry Medvedev linked important economic topics and Russian foreign policy in his annual address.
Photo: Alexander Miridonov
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What the Prez. Says about Currency
// In his address to the Federal Assembly
Competition between Russia and the United States on the financial market and the expected triumph of the ruble over the dollar as a regional currency has become official doctrine for the Russian financial market. Russian President Dmitry Medvedev devoted part of his address to the Federal Assembly to that topic and announced the first necessary step in that process – converting oil and gas exports to ruble payment.
The economic part of the president’s address was exceptional short, clearly less than 10 percent of the whole speech. Medvedev tied the most significant economic topics (the world financial crisis, the ruble in international trade proposals to be unveiled at the G20 summit) with the foreign policy strategy of Russia. He began his speech by drawing a parallel between the war in South Ossetia and the financial problems in the U.S.
The president did not reveal the actual proposals for the G20 financial summit in Washington on November 15, but he explained that “The development of new risk systems,” harmonization of accounting systems and supervision of the capitalization of financial structures should be the task of “international organizations that already exist and ones to be founded.” Now, all of those issues, in Russia and elsewhere, are under the control of national authorities. In Russia, those bodies are the government, Finance Ministry, Central Bank, Federal Financial Markets Service and the Federal Insurance Supervision Service. “New rules for world financial architecture” to replace the “monopoly in this sphere” (obviously, he means the monopoly of the U.S.) should be formed using suggestions from many participants in it, including Russia.
The president had this to say about his own proposals: “Practical steps have to be taken to strengthen the role of the ruble as one of the currencies of international payment settlement. And finally, to begin the conversion to settlements in rubles, which we, unfortunately, have put off, of course, first of all for natural gas and oil.”
In addition, the president declared that a package of laws must be passed to “form the basis for the creation of one of the leading world financial centers in Russia” and to stimulate the issuance of financial instruments denominated in rubles “preferably on the Russian market.” He explained that “the final goal of all these processes is to make the ruble one of the regional currencies.”
None of the elements of Medvedev’s project are news by themselves. In January 2006, the Federal Financial Markets Service, which had been talking for two years about the need to increase the portion of IPOs made in Russia at the expense of stock placements in London, tightened rules of issuers selling shares to foreign investors, including those using ADR and GDR. IPOs reached the peak of their popularity in Russia at the end of 2007. There have been practically none in the second half of this year. The last attempt to increase the popularity of the ruble on the stock market was made during the visit of Chinese Premier Wen Jiabao at the end of last month, when the proposal was made to the Chinese to make “double listings” of issuers on the Russian and Chinese stock markets (including Shanghai and Hong Kong). The results of those negotiations were not made public.
Medvedev and Prime Minister Vladimir Putin have been popularizing the idea of turning the ruble into a regional currency since the beginning of the year. In October, Putin officially proposed to Belarus, China and Vietnam that the ruble be used in mutual trade. In the summer of this year, the same proposal was made to Ukraine, Moldova and Mongolia. So far, only Vietnam has agreed, in principle.
The idea of using the ruble for settlement in oil and gas trading was set out by Putin in February and March of this year as part of the initiative to establish a financial center in Moscow. Although it amounts to a national project in practice, the project to create an alternate pricing system for Russian oil and the creation of an International Raw Materials Trading Exchange in St. Petersburg have not yet met with any perceptible success. Deputy Prime Minister Igor Sechin has been advancing the idea of ruble settlements in foreign trade in gas and oil and has also repeatedly stated that Russia needs to declare its own oil and gas policy. However, as of the beginning of November 2008, world practice, and the practice of the Swiss trader Gunvor, the largest agent for Russian oil companies, is to use the dollar in oil trading. Iranian President Mahmoud Ahmadinejad is also a consistent critic of the use of the dollar in oil trading. He has not been able to strike any significant number of contracts with the Iranian state oil company in euros.
Nonetheless, the topics of the Russian financial crisis, the problems with the U.S. financial system, the role of the ruble in the world financial system and the Russian domestic and foreign economic strategies were tied together for the first time at the official level in the president’s address on November 5. The second part of the economic message in the president’s address was an appeal to the works of American economist of Russian origins Vasily Leontyev (1973 Nobel Prize winner), who theorized on planning in a market economy and created a theory on intersectoral balances. A number of his ideas were popular in the U.S. from the 1960s to the 1980s.
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Quantification of the 2008 Presidential Address
Dmitry Medvedev’s first address to the Federal Assembly proved to be more loquacious than those of his predecessor. The length of his speech and the number of letters, words and sentences in it exceeded the indicators for all of Vladimir Putin’s addresses. Only the rate of President Medvedev’s speech was slower. The new president was interrupted by applause 56 times, which is more than the best result for Putin (47 times in 2006).
For the second year in a row, the most common word in the presidential address was “we.” It was used 92 times by Medvedev. Last year, Putin used it 60 times. Medvedev also talked a lot about what awaits the country in the future. In second place was the word “will,” used 57 times. For comparison, Putin used the word 15 times in his first address in 200, and 16 times in his 2007 address. The past is of less interest to Medvedev. He used the word “was” and related forms 16 times in his speech.
The president devoted an unaccustomed amount of time to “freedom” (mentioned 29 times) and the “school” (18 times). In 2007, Putin mentioned “school” twice and “freedom” four times.
“Crisis” was mentioned 17 times. By traditions, the word “Russia” was used heavily, 44 times. Other countries mentioned by the president were the United States (6 times), South Ossetia (5 times), Abkhazia (3 times), Georgia (twice) and Serbia and China (once each). In his eight years in office, Putin showed somewhat different priorities, most often mentioning the U.S., Ukraine and Belarus.
“Economics” and related words were used 37 times in 2008 (34 times in 2007). “Politics” was heard 33 times (23 times in 2007). The president often mentioned “the state” (28 times) and “society” (23 times). The problems of the individual were of less interest to the president. He used the word “person” 14 times.
Dmitry Butrin
All the Article in Russian as of Nov. 06, 2008
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