MOSCOW: Russian President Vladimir Putin is discussing the idea of pegging the rouble to gold and other goods, the Kremlin said on Friday, a move that if approved would directly link Russia’s currency to bullion for the first time in more than a century.

Meanwhile, Russia’s finance ministry said on Friday it had completed payments on two dollar-denominated bonds amid mounting fears that the sanctions-hit country may be forced to default on its foreign debt.

The ministry said in a statement it had made coupon payments totalling some $650 million on two bonds maturing in 2022 and 2042 “in the currency of issue of the eurobonds — US dollars”. In early April, Moscow had attempted to make payments on these bonds in rubles after the United States barred Russia from making debt payments using dollars held by American banks in the wake of the Ukraine conflict.

A powerful Russian security official said this week linking the rouble to bullion could give Russia more “sovereignty” over its financial system, which has been battered by Western sanctions since Moscow sent troops into Ukraine on Feb. 24.

Moscow pays foreign debt in dollars amid default fears

Asked about the idea on a conference call with reporters, Kremlin spokesman Dmitry Peskov said “this question is being discussed with Putin”.

However, the governor of Russia’s central bank, Elvira Nabiullina, told reporters the idea was “not being discussed in any way”.

Russia produces around 10 per cent of the gold mined globally each year and is a major producer of oil, gas, metals and grains.

In what some saw as an attempt to link the rouble with gold, Russia’s central bank said in March it would buy gold at a fixed price of 5,000 roubles a gram until June 30. But two weeks later, after the rouble had strengthened sharply, it backtracked and said it would buy at negotiated prices.

Many currencies have in the past been pegged to gold or silver. Russia adopted the gold standard in 1897 but, like many countries, abandoned it during the First World War as governments printed money to finance the conflict.

Published in Dawn, April 30th, 2022