chapter  11
The Collapse of the Ruble Zone, 1991-93
WithKing Banaian, Eugenue Zhukov
Pages 21

This chapter discusses the events that led up to and immediately followed the dissolution of the ruble zone. It describes the factors motivating a decision to remain in or exit from a currency zone. A currency zone can only function properly with a single monetary authority. If two or more central banks co-exist, each can capture the full benefits of issuing currency that make the government popular, while imposing some of the costs on other members of the currency zone. The United States and the International Monetary Fund initially supported it, whereas the European Bank for Reconstruction and Development advised against attempting to maintain the ruble zone, owing to the lack of coordinated currency and budget policies. While a large commonweaith-wide ruble zone has collapsed, subsets of the commonwealth have started to form smaller alliances. The chapter concludes with an appraisal of the inherent difficulties faced by the republics in adopting fully independent currencies.