BELARUS NEWS AND ANALYSIS

DATE:

15/08/2007

Belarus to Link Currency to Dollar

MINSK, Belarus -

Belarus will tie its currency, the ruble, to the dollar beginning in 2008, decoupling it from the Russian ruble, the Central Bank announced Wednesday.

The decision, if carried out, would effectively end efforts to have a single currency shared by both countries and sharply hamper efforts to tie the two countries economies more closely together.

"Beginning in 2008, the National Bank intends to refrain from the policy of coupling the official exchange rate of the Belarusian ruble to the Russian ruble," the bank said in a statement.

National Bank Chairman Mikhail Zhurabovich said the decision was tied to the weight that the dollar had on Belarus' currency exchange rates and the saving habits of Belarusians - many of whom prefer to keep earnings in hard currencies like the dollar or the euro.

Stanislav Bogdankevich, a former bank chairman, called the decision political, saying it was tied to Belarus' open displeasure at Russia's decision to hike oil and gas export prices to Belarus earlier this year. Belarus' economy is largely Soviet-style, centrally controlled and has been heavily reliant on cheap energy supplies from Russia.

The two nations agreed a decade ago to form a close economic and monetary union. But the idea has largely gone nowhere and the recent energy pressure on Minsk suggests the Kremlin is growing tired of supporting President Alexander Lukashenko, who has resisted efforts to let Moscow have more control over his country and its economy.

"After the 'gas scandal,' President (Alexander) Lukashenko buried the idea of creating a union with the Kremlin," Bogdankevich said.

Source:

http://www.forbes.com/feeds/ap/2007/08/15/ap4023312.html