Crossroads Asia

A Common Currency for the EEU?

Russian officials certainly seem to think so. Others seem less enthused.

A Common Currency for the EEU?
Credit: Presidential Press and Information Office, Kremlin

From the moment of its inception, tensions within the formation of the Eurasian Economic Union have been palpable. Where Kazakhstan President Nursultan Nazarbayev had originally envisioned an organization cobbled of equal partners – an organization far more attuned to the model of the European Union – Russian President Vladimir Putin has molded the EEU into a vehicle for regaining Russian hegemony, playing Russian supremacy to a domestic audience watching their economic flexibility disappear. Kazakhstan – and Belarus, Armenia, and Kyrgyzstan, to lesser extents – has done what it can to derail Moscow’s attempts at geopolitical revanchism, stalling efforts at unified defense policies or a Eurasian parliament under the guise of the EEU.

But these temporary successes at pushing back at Russian supremacy within the EEU remain just that – temporary. The tensions remain, and occasionally bubble into the public sphere.

The most recent line of divergence came forward earlier this month, in the vein of a common currency. Like common passports before it, Kazakhstan had managed for the past year to stanch movement toward a single EEU currency. Time and again, Russian officials had lobbed notions of a single currency with Kazakhstan officials repeatedly demurring, highlighting the fact that no substantive discussions, let alone agreements, had taken place within EEU bodies.

Russian officials, however, seem to not have gotten the message, and seem set on continuing to lobby the inevitability of a common currency within the EEU. On December 2, Russia’s National Payment Council Alexander Murychev told Izvestia that a common currency was all but certain. Further, Murychev added that intra-EEU transactions would soon ban both dollars and euros, building a “joint payment space” based, for the time being, on national currencies. “The creation of a single payment space in the EEU will create … a fast transition to a single currency space,” Murychev said. According to Tengrinews, Duma member Natalya Burykina backed Murychev’s claims, “in light of the plans to create a single economic space within the EEU.” Russian official Yevgeny Tarlo further added support to banning the dollar and euro because “the collapse of the US economy could not be ruled out.”

The Kazakhstani response was swift, with the country’s National Chamber of Entrepreneurs noting that the current EEU treaty “does not preclude use of foreign currencies in mutual settlements between residents of the EEU member-states.” The Eurasian Economic Commission even weighed in, noting that the proposal to ban dollars and euros “had no basis in reality.” Likewise, added Tengrinews, an increased coordination of payment systems does not “mean … creating a single currency” within the EEU.

The likelihood of an eventual common currency within the EEU would be slightly greater if it weren’t lobbied almost solely by Russian officials – and didn’t see consequent pushback from Kazakhstani voices anytime the notion is raised. As it is, this dynamic doesn’t seem likely to change at any point in the near future. After all, due in large part to Russia’s collapsing ruble, another devaluation in Kazakhstan’s tenge is predicted in 2015. Russian officials may peg efforts at a common currency to the fact that they can’t rule out the imminent collapse of the US, but it appears Astana would rather take this risk than tethering their currency any further to a country set for self-imposed recession.