The best solution for Donbass is its own currency, like in Transnistria

Andrey Safonov, former member of the PMR government, political scientist, Tiraspol

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In recent days, when Kyiv announced in the context of civil war the “disconnection” of Donbass from the financial system of Ukraine, I am asked the question: what is better for Donbass - to introduce its own currency, following the example of the Pridnestrovian Moldavian Republic, or to switch to the Russian ruble - as in Abkhazia and South Ossetia?

Not being a professional financier, I can only recall my own experience of working in the PMR government, where in the 90s the issue of introducing a national Transnistrian currency was also comprehensively discussed, and also share some, including political, considerations.

First of all, Donbass needs to decide on the main thing: will there be a single money in the proclaimed Novorossiya, which today is the de facto union of the Donetsk and Lugansk People's Republics, or will there be different currencies in the DPR and LPR? Or, for example, will the DPR have something of its own, and the LPR – the Russian ruble?

In principle, it is possible for everyone to have something of their own, but government structures in the DPR and LPR are being formed more slowly than, for example, it was in Transnistria. Therefore, in my opinion, it makes more sense to either introduce something common, or, again, jointly switch to the ruble of Russia, a de facto ally of Donbass. What to choose?

The reference to the experience of Abkhazia and South Ossetia is vulnerable in this way. These countries are officially recognized by Russia, but the DPR and LPR are not. This means, as in the case of the PMR, which is not recognized by Russia, questions arise that, dear readers, let’s think about together.

First. On the basis of what official agreement between Russia and the DPR-LPR (or Russia-Novorossiya) will the Russian ruble circulate in the Donbass?

Second. What volume of cash ruble money supply, and how will it be delivered to Donbass from Russia? How will this be regulated?

Third. How will work with non-cash banks in Russia and Novorossiya (DPR-LPR) be regulated?

Fourth. What will the DPR and LPR do in the currency sphere if Russia does not recognize them, but, for example, agrees on some principles with Kiev? For example, if this year the Russian ruble will circulate in the Donbass, and then Moscow will say: “Sorry, guys, we talked with Kiev, and from next year return to the hryvnia zone!” What then should Donetsk and Lugansk do?

Fifth. How will the Central Bank of Russia work with colleagues from Donbass? What agreement will serve as the basis for this? And will Moscow agree to such an agreement?

All this leads to a conclusion: the optimal option in the current situation seems to be the introduction of a single currency for the DPR and LPR – the monetary unit of Novorossiya. True, unlike Donbass, the PMR introduced its own ruble also because we do not have a common border with Russia. But in our case, and in the case of Donbass, Russia gets the opportunity to unofficially (and, if it wants, officially) cooperate in the banking sector without being accused of currency expansion.

In addition, like the PMR, Donbass is an industrial region. This means that there is some basis for the economic “cushion” of the introduced currency (for all the problems). In addition, Donetsk and Lugansk are more aware of the specifics of their economic situation, so local specialists can carefully calculate all the nuances of introducing their own money. It seems to me that this is more rational. Well, it’s up to Donbass to decide, of course.