The History of Russian Money (The ruble celebrates its 1000th birthday)

The first Russian coins were minted when Russia was converted to Christianity. The gold and silver pieces, those “business cards “ of Kievan Rus, were first made under Grand Duke Vladimir Sviatoslavich (late 10^th — early 11^th century). After a long “coinless” period, minting was resumed in the 1380s, under Grand Duke Dmitry Donskoy of Moscovy.

The Russian monetary system, which laid the foundations of national accounting, nomenclature and even the present-day ruble, took shape in the early 16^th century. Then, the chief currency unit was the silver kopeck with a depiction of a horseman with a lance (kopye in Russian), which was Russia’s emblem and the symbol of grand-ducal power. The kopeck’s emergence is connected with the 1535-1538 reform of Yelena Glinskaya, whose end-product was a single monetary system for the centralized Russian state, namely the ruble containing 100 kopecks.

But by the 17^th century, the Russian monetary system, based on just one type of coin, the one-kopeck piece, had become something of an anachronism, lagging behind the more convenient European arrangement. Peter the Great brought into circulation various denominations: one-ruble, fifty-kopeck, quarter, ten-kopeck, and other coins. The drastic change also involved the mining metal, with gold and copper coins being produced in addition to the traditional silver pieces, and machine-minted coins taking the place of the hand-wrought ones.

The reform of finance minister Count Kankrin (1839-1843) was the first step towards turning paper banknotes into money backed by precious metal reserves. The silver ruble was recognized as the principle monetary unit.

During finance minister Sergei Witte’s tenure in office (from 1892), paper banknotes were backed by gold reserves worth 1.5 billion rubles, and a new monetary economy was set up on the basis of scientifically computed paper money emission rates. Thanks to Witte’s reform, Russia finally managed to close the age-old gap between itself and Europe and to integrate into global financial system. The ruble became convertible.

In the post-1917 period there appeared the first paper banknotes of Soviet Russia, Admiral Kolchak’s money and some other specimens. The monstrous hyperinflation of the first years of Soviet power, caused by experiments in eliminating commodity relations, subsided once the New Economic Policy was in place and the gold reserves in the country rebuilt. The chervonets, as the new equivalent to 10 pre-revolutionary rubles was known, helped revive the Russian monetary system founded by Witte. It stayed in circulation until 1928. With the first five-year plan in operation, when the government resumed its practice of high emission rates, inflation returned and the Soviet ruble became an exclusively domestic legal tender.

Key terms.

1. Money

2. Medium of exchange

3. Unit of account

4. Store of value

5. Token money

6. Legal tender