The rublification of all trade and investment relations between Russia and its partners is a first and very important step on the way from currency sovereignty to a new role for the ruble as a reliable alternative to other currencies. That is, the transition to a model where Russia transfers all its investment, credit and trade relations to its own ruble, like the transition of payments for hydrocarbons in the spring and summer of 2022, is quite possible and feasible, but will come with certain reservations.
In particular, there are assets of the Russian Federation in various international financial institutions. Take, for example, the Russian-Kyrgyz Development Fund (RKDF)
with an authorised capital of $500 million. It was created to facilitate the adaptation of the Kyrgyz economy to the realities of the Eurasian Economic Union and to strengthen the industrial and agricultural components of the national economy. It is clear that this is entirely the money of Russian taxpayers, and now, in a period of geopolitical turbulence, it is important to understand how prudently it’s being used, on the one hand, and on the other hand, why the assets of the RKDF are still denominated in US dollars, and not in Russian rubles or Kyrgyz soms.
Moreover, when creating the RKDF, it was assumed that the assets would total 1 billion US dollars, which at that time was comparable to the deposit base of the entire banking system of Kyrgyzstan. But it turned out that even half a billion dollars could not be easily and quickly used in the industrial and agro-industrial projects of a country with a GDP slightly below 8 billion US dollars per year
In fact, the total volume of potential investment projects in Kyrgyzstan exceeds 20 billion US dollars, since it includes the construction of a railway network with access to China, powerful hydroelectric power plants, the development of various mineral deposits, and good potential for agricultural products that are in demand not only amid markets in the EAEU, but also in other countries.
The excessive dollarisation of the Kyrgyz economy (more than half of loans are issued in US dollars) and extremely high loan rates in the national currency have led to a situation where lending to the real sector has become a problem, not to mention direct investment and project financing. Now there is a unique chance for the rublification of investment, credit and trade relations between Russia and Kyrgyzstan as a pilot project. The presence of a unique instrument like the Russian-Kyrgyz Development Fund, a "clean" balance in interstate relations (Russia for 31 years wrote off all the debts of Kyrgyzstan, an amount totalling more than 700 million US dollars, and is no longer a creditor of the external debt of the Kyrgyz Republic from 2016
) make it possible to conduct this economic experiment quickly and painlessly. Russia is a key trading partner of Kyrgyzstan both in terms of exports and imports, transfers of citizens of the Kyrgyz Republic working in the Russian Federation account for more than a quarter of Kyrgyzstan's GDP - all this together gives hope for the success of the rublification of relations between allies in the EAEU as a whole. In fact, the same RKDF allocates loans in US dollars, demanding in return the priority of purchasing equipment or semi-finished products from Russian suppliers, but again in "unfriendly" currencies! It is time to cut this Gordian knot of dependence on a third party, and for this there are all the necessary prerequisites.
Extrapolation of the experience of the rublification of Russian-Kyrgyz relations to other members of the EAEU and participants in the CIS free trade zone (the key stakeholders are Azerbaijan, Uzbekistan and Tajikistan, which are not members of the EAEU) will allow the obtaining of the so-called minimax, that is, the maximum result with minimum effort in the face of risks and losses associated with geopolitical turbulence.
The US dollar actually has many faces and it has an interesting projection called the Eurodollar. Typically, this is a US dollar held outside the US banking system which is used to service international trade
. The array of Eurodollars is so large that, in a hypothetical case of "homecoming", they could completely destroy the US economy (at least its financial system), causing a hyperinflationary tsunami. Such predictions are regularly voiced by economists
(for example, Mikhail Khazin), but such a scenario is still unlikely. We are interested in the algorithm for building a stable system of circulation of the “external ruble” within the framework of actual rublification. Most likely, China's unique experience in splitting the yuan into onshore and offshore yuan, as well as issuing panda bonds denominated in yuan, will most likely be more applicable in this case.