1

Was the Soviet rouble also backed by the US dollar, which was the global reserve currency at the time?

I remember reading something about Soviets taking aid from the US, in the 1970s, after Soviet crops were devastated.

4
  • I am afraid, your question is unclear. For the purpose of international trade, USSR did not use rubles (at least, for the trade outside of the "Soviet block"). I am not sure what you mean by "backed by the US dollar." Also, please, add references to "I remember" (afaik, this was not aid, this was trade). – Moishe Kohan Feb 2 at 1:17
  • 2
    Welcome to History:Stack Exchange. Thank you for your question; please consider revising it to be more in line with our community expectations. Like many other stacks, we expect questions to provide evidence of prior research. That helps us to understand the question, and avoids our repeating work you've already done. Our help center, and other stacks provide additional resources to assist with revisions. – Mark C. Wallace Feb 2 at 1:40
  • 2
    Please define 1) your understanding of reserve currency 2) "backed by" and 3) What does either concept have to do with food aid? – Mark C. Wallace Feb 2 at 10:06
  • rt.com/business/462884-russia-china-ruble-yuan-trade This is very recent... – Luiz Feb 2 at 14:46
6

Clearing dollars

To understand why US dollar was reserve currency, you need to understand three things. One, US was definitely by far largest economy at the end of WW2. If you possessed US dollars, you could always trade them for US built goods which were plentiful. Consequently, traders across the world would also accept USD, effectively backing it up by not just US, but also world economy. Second, all of these above was formalized with Bretton Woods system, tying up other major (Western) currencies to USD. Finally, there was a petrodollar agreement where Saudi Arabia (and other Gulf monarchies) agreed to sell oil denominated exclusively in USD, in exchange for protection and backing of US and Western powers.

This left USSR in a predicament. Soviet ruble was backed by Soviet economy, but Soviet economy was much weaker then US economy. There were some things you simply could not buy with rubles, even if you had enormous quantities of them, because Soviet Union did not produce them. To back ruble with gold or silver was out of the question (even US abandoned gold standard) because there was simply not enough of these precious metals. There was a official exchange ratio between USD and ruble, but nobody in his right mind would sell dollars at that price unless forced to do so. Unofficially, ruble was worth much less on the black market, and people were still buying USD at inflated prices in order to purchase some consumer goods smuggled from the West or simply to use them as savings. Even countries in Soviet Block where not too keen to trade in rubles, and preferred USD when they could get them, because with USD they could trade not only with the West, but also with countries keeping themselves neutral in Cold War.

So what was to be done then ? Answer was clearing dollars. This simplified works like this: Neither you or I have USD because we do not trade much with evil capitalists in the West :) But, I have some fighter aircraft and you have grain. We agree that my fighter aircraft are worth $80 million, your grain $100 million, and IOU $20 million. Sometimes latter I could send you $30 million worth of cabbage, and you will send me $10 million worth of timber, and we are settled.

In this manner, although neither of us had real USD, we could still use them as a tool for barter. Of course, prices on these agreements would vary, sometimes they were realistic market prices at the moment, sometimes USSR helped some countries in order to gain prestige, sometimes those countries sold at discount etc ...

3
  • Currencies of the socialist countries were solely internal currencies. The methods described in this answer also applied to trade between the socialist countries using the Transferrubel (no English version available). – Mark Johnson Feb 3 at 23:06
  • 1
    @MarkJohnson It should be noted that transfer rubles were not popular even in socialist block, because none essentially knew their real value on the market (there was no market :) ) and exchange ratios were administrative, almost arbitrary. Even among Soviet friendly nations they preferred to denominate contracts in (clearing) dollars, because some approximate value of goods could be deduced. That is why article says that "hard goods" were sold for hard currency (i.e. dollars) and "soft goods" for transfer rubles. – rs.29 Feb 4 at 9:29
  • 1
    Yes, that conforms to what I was told by someone in Poland that studied economics during the 1970's and worked in that area in the 1980's. – Mark Johnson Feb 4 at 11:09
5

The Ruble wasn't backed by anything except the Soviet State. There were 2 completely separate economies in place within the USSR, one based on Rubles, one based on whatever foreign currency was available to the central bank. Technically there was a 3rd, a "certificate Ruble" that could be exchanged for foreign currency, but that was only available to foreign visitors and as a special reward for some citizens, and could only be used in certain special stores not open to the general public, with the exchange rate being set at whatever the Soviet central bank wanted.

So for foreign trade, you'd have to go to the appropriate government agency and request them to attain what you needed. They'd then go on the international market and purchase that for some of the very limited supplies of foreign currency available to the Soviet government. Ditto, if you had something to sell on the international market, you'd have to go through a government agency and they'd sell it for you, gaining foreign currency, and you'd then get paid by them in Rubles according to some imagined exchange rate (probably based on the amount you'd have gotten had you sold it within the USSR). Remember that it was actually illegal for most Soviet citizens to be in posession of foreign currency unless they were actually traveling abroad (which was pretty rare, most of them never left the country and would never get permission to do so if they requested it).

4
  • 2
    The 4th currency was "cashless" ruble (used for transactions between state enterprises). – sds Feb 3 at 2:38
  • @sds I assume you mean the ' transfer Rubel', which was used in trade between the socialist countries between 1963 and 1990. – Mark Johnson Feb 3 at 23:22
  • 1
    @MarkJohnson: absolutely not. I mean what I said. When a car maker gets steel for cars, it "pays" to the steel maker with those "cashless rubles" (безналичные рубли) that cannot be used to pay people. The runaway inflation of the late 1980-ies was caused by "cooperatives" being allowed to turn the "cashless rubles" into actual cash that can be used by people to buy stuff. – sds Feb 4 at 19:56
  • 1
    @sds Then transfer Rubel can be considered a 5th currency, that was only used by the central banks of the socialist countries when trading. – Mark Johnson Feb 4 at 20:13
1

Given the Soviet Union & the United States were engaged in a prolonged cold war where each tried to showcase the supremacy their political and economic systems, the two countries were in competition with each other.

The both sought the demise of the other while trying to gain as much influence internationally. The US would not have backed the Soviet ruble, instead it would have done what it could have to damage the ruble and ruin the Soviet economy to neutralize the threat that the Soviet Union then posed to the United States.

With the abandonment of the gold standard and the adoption of the 1944 Bretton Woods agreement, the US dollar eventually became the dominant currency used in international trade. It is for this reason that the Soviet Union had US dollars, so it could trade with non Warsaw Pact countries.

0

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.