Ruble Zone

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"Ruble zone" refers to the accidental currency union that emerged when the Soviet Union broke up in December 1991, after which several independent states (former republics) each used the ruble as their primary currency. This sparked an intense debate among the Central Bank of Russia (CBR), the Russian government, the other post-Soviet governments, and the international financial institutions over the pros and cons of retaining the ruble zone. The ruble zone at first encompassed all fifteen former Soviet republics, grew progressively smaller through 1992 and 1993 as the new states introduced their own currencies, and disappeared completely in 1995 when Tajikistan adopted the Tajik ruble as its sole legal tender. The three Baltic states, having no intention of staying in the ruble zone, introduced their own currencies in mid-1992, but the other post-Soviet states initially chose to remain.

The ruble zone's existence presented a significant dilemma for the CBR, because it prevented the CBR from controlling the Russian money supply. Only the CBR could print cash rubles, because all of the printing presses were on Russian territory. However, a legacy of the Soviet-style currency system (called the dual monetary circuit) allowed any central bank in the ruble zone to freely issue ruble credits to its domestic banks. These banks then loaned the credits to domestic enterprises, which could in turn use them to purchase goods from other ruble zone states (primarily Russia). In effect, the ruble zone states self-financed their trade deficits with Russia through these credit emissions. In addition, several ruble zone states issued socalled "coupons" or parallel currencies to circulate alongside the ruble in 1992 and 1993, thereby increasing the cash money supply in the ruble zone as well.

In an attempt to mitigate the impact of this credit expansion on the Russian economy, as of July 1992 the CBR began keeping separate ruble credit accounts for each state. In August 1992 it announced that Russian goods could be purchased only with CBR-issued credits, and it suspended the other banks' credit-granting privileges entirely in May 1993. During this process, Ukraine and Kyrgyzstan left the ruble zone. The CBR then fatally undermined the ruble zone through a currency reform in July 1993. It began to print new Russian ruble notes (circulating at equivalency with the old Soviet ones) in early 1993, but did not send these new rubles to the other states; they received their cash shipments solely in Soviet rubles. On July 24, the CBR announced that all pre-1993 ruble notes would become invalid in Russia, forcing the other ruble zone members either to leave or to cede all monetary sovereignty to the CBR. Azerbaijan and Georgia left the ruble zone immediately, while Armenia, Belarus, Kazakhstan, Moldova, Turkmenistan, and Uzbekistan left in November 1993 after talks on creating a ruble zone of a new type broke down. Although this effectively destroyed the ruble zone, its formal end came in May 1995 when war-torn Tajikistan finally introduced its own currency.

See also: monetary system, soviet; ruble


Abdelal, Rawi. (2001). National Purpose in the World Economy: Post-Soviet States in Comparative Perspective. Ithaca, NY: Cornell University Press.

Chavin, James. (1995). "The Disintegration of the Soviet Ruble Zone, 19911995." Ph.D. diss. Berkeley, CA: University of California, Berkeley.

Goldberg, Linda; Ickes, Barry; and Ryterman, Randi. (1994). "Departures from the Ruble Zone: The Implications of Adopting Independent Currencies." World Economy 17 (3):239322.

Johnson, Juliet. (2000). A Fistful of Rubles: The Rise and Fall of the Russian Banking System. Ithaca, NY: Cornell University Press.

Juliet Johnson