Although Russia presides over the G8 in 2006, and is going to play host to its summit in St. Petersburg in a week, some observers in the West are still doubtful that Russia is an equitable member of the group. Or was it invited because the majority of G7 countries depend on the exports of energy carriers from Siberia?
"Russia is a full-fledged member of the G8, and is one of the leaders of the global economic system," said Arkady Dvorkovich, head of the Russian presidential administration's expert department. "We are not a member of the G8 financial club, and we consider this situation very strange because it is simply impossible to resolve without Russia such global financial issues as the level of world oil prices and major currencies, or decide on what should be done to achieve stabilization. We are among the world's economic leaders, and no effective and long-term solutions can be found without the contribution of a country, which is located at the junction of Europe and Asia," he said.
The differences between Russia and other G8 members are obvious. Russia is the only member whose currency is not fully convertible. Until recently, its economy was burdened by a huge national debt. However, positive trends in the economy, and the efforts of the Russian authorities are allowing Moscow to gradually enhance its role in the world financial markets.
In late June Russia and the Paris Club of Creditors signed a multilateral protocol whereby Russia will pay off the remainder of its debt -- $21.3 billion. Starting with July 1, Russia has lifted the last currency restrictions. This is a major step towards making the ruble convertible. Both decisions are vital for Moscow, and leave fewer arguments to the critics of Russia's G8 membership.
Early debt repayment is a major event for the Russian economy. In 1993 Moscow declared its intention to pay off in full the debts of the former Soviet Union. During the last 13 years Russia was both a debtor and creditor, and now it is becoming a donor. The Secretariat General of the Paris Club reports that the forthcoming transaction will be the biggest early debt repayment in its history. Once it is made, Russia will become a full-fledged creditor.
"An early and full repayment of the debt to the Paris Club will further enhance Russia's rating," said head of the Russian Vneshtorgbank Anatoly Kostin. "The dynamic growth of the Russian economy in the last few years has been largely promoted by the prescheduled debt repayment," he explained.
As a donor, Russia is going to join the G8 initiative on writing off debts of the poorest countries. A few years ago, Russia was unable to be a donor but now its economy has grown enough for it to become one. This year it intends to write off $700 million of debts. World Bank President Paul Wolfowitz described Russia's decision to cancel debts of the African countries to the former Soviet Union as very important. He said that this decision put Russia into the category of a donor, and that he would prefer to use another term - partner.
Talking about the lifting of remaining currency restrictions, Deputy Chairman of the Russian Central Bank Konstantin Korishchenko said that starting with July 1 Russia will be in another category - a country without any restrictions on the flow of capital.
No limitations on current and capital transactions are indispensable for the convertibility of national currency. Russia lifted the former restrictions long ago, but the latter existed until July 1, 2006. Now they are gone. The government believes that this step will encourage foreign investors to conduct business in Russia, and will let Russian businessmen freely invest abroad.
Obviously, there will be more confidence in the Russian ruble. Russia's trade partners are bound to see that the ruble is growing stronger, that it is stable, and that its exchange rate is predictable. Today, the ruble may be freely exchanged in the CIS and the Baltic countries. Much time has to pass before it becomes fully convertible. The required economic conditions will depend on the intention of other countries to accept rubles in international transactions, the growth rates of the Russian economy and financial market. Russia has done all it could to make the ruble hard currency. Now the ball is in the Western court.
To sum up, the Russian government has taken these decisions to make a change from its transitional economy to equitable participation in the life of the world economic community. Moscow has shown its intention to use the common standards of the international financial system. This will promote Russia's integration into the global economy, and help it join the G8 financial club.
