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LOOKING AHEAD
23.03.2009

March 20, 2009 (the date of publication in Russian)

Alexander Sobko

WILL THE NEW RESERVE CURRENCY BE CREATED?

The fact that such a proposal comes from Russia increases the significance of the country in world politics

Most of the observers agree that the next month's G20 London summit on world financial crisis might significantly influence the world economy and the effectiveness of fighting against economic depression. It's interesting, that even OPEC postponed making another decision about volumes of oil production till the end of May, so quotas could be changed according to the G20's proposals on the ways out of the crisis.

At the same time there are no guarantees for this summit to be anything more than the previous one. It may become another "wish-wash" without truly efficient decisions. Another futile meeting would be of a crucial meaning for the further development of the crisis – with a "minus" sign in front of it though.

As we remember, previous November G20 summit gave no real results. And in spite of many experts trying to explain that by participants beginning to learn to interact with each other, to find points of contact, real reasons seem to hide in totally different area – the accepted declarations were really limited by the very paradigm of global finance, which has led to the present world economy collapse.

However, there are solid grounds for supposing that the last half a year made top officials of the leading countries change their views on many things. In spite of the fight against protectionism being called one of the best means to withstand the crisis, last months national leaders tried to act in a quite opposite way. One of Obama's administration's anti-crisis program points included a motto: "Buy American!", Nicola Sarkozy tried to return national automobile industry plants back to the territory of France, and the administration of Germany promised to help Opel only in case it broke off with the US General Motors.

And just like the German company needs to break off with its formal "parent" US corporation, all national economies have to break off with binding to the dollar to get out of the crisis.

Actually the rejection or agreement to acknowledge the USA as the one making rules of the game will become the main criterion of the effectiveness of the decisions to be made during the April summit.

In spite of the USA being the main cause of the crisis, participants of the previous summit had only reproved the USA a little. This could be connected with hopes for Barack Obama being elected and do some serious reforms, but now we can see that the new US administration has made no "breakthrough" proposals. It's interesting, that even Mirek Topolanek, Czech prime minister who is said to have pro-American views, blamed the USA in trying to solve their own problems at the expense of the rest of the world.

The decision of reforming the IMF might become one of the indicators of a break off with the US influence on the world economy. This was one of the main topics discussed during the meeting of finance ministers of G20 member-countries. And even though the first proposal came from Timothy Geithner, the US Secretary of Treasury (he offered to increase the volume of dollars used for fund's lending resources from $250 billion to $500 billion), it's obvious that this initiative can be supported by the other countries only together with the decreasing of the US influence on the IMF policy. On the threshold of the April summit so-called BRIC countries (Brazil, Russia, India and China) have released a joint communiqué, offering to increase their participation in the work of the institution.

The Russia's President's proposals to the forthcoming G20 summit published on his website contained similar appeals. But more revolutionary issue of the document is the point about the creation of supranational reserve currency and obligatory diversification of currency reserves of national central banks. The acceptance of even one of these points essentially means the beginning of rejection of the dollar being world reserve currency.

Recent Abdullah Gul's (the President of Turkey) affirmation about the intension to use national currency in settling with Russia and China is interesting in this context.

And even if Russian proposals will be blocked by some members of the "twenty", the announcement of these vital theses will strengthen the prestige of the Russian Federation on the world arena. During the previous summit the position of the RF had a wait-and-see character. That's why it's really important, that our country's government has prepared significant and well-timed proposals, which reflect true interests of the nation.


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