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Crimea goes for ruble earlier than planned

June 03, 2014, 17:56 UTC+3 Alexandrova Lyudmila
© ITAR-TASS/Alexei Pavlishak

MOSCOW, June 03. /ITAR-TASS/. Two and a half months after Crimea and Sevastopol joined the Russian Federation, economic integration of the newly accepted regions is not going without a hitch. The local banking infrastructure is in ruins as the Ukrainian banks have left the peninsula, while the major Russian banks are hesitating in fear of possible sanctions, but all problems are resolvable in the foreseeable future, experts say.

From June 1, the Russian ruble is the only official currency in the peninsula and the city of Sevastopol. Parallel use of the ruble and the Ukrainian hryvnia was initially planned to be prolonged until January 1, 2016, but on May 6, the National Bank of Ukraine instructed Ukrainian banks to sever relations with financial organizations operating in Crimea, and the peninsula became part of the ruble zone earlier than expected.

“All transactions have been carried out with rubles for already two weeks,” said the Chairman of the Crimean branch of the Russian Association of Young Entrepreneurs, Oleg Sveshnikov. “There have been recently long lines in supermarkets, but not because of panic, contrary to what the Ukrainian media said. The people crashed their penny banks to get rid of change hard to convert into rubles at exchange offices. Everybody is satisfied there is no more need for double price tags. There is no flurry as you can always exchange hryvnias you have left”.

“Transition to the ruble in Crimea does not pose any threats for the Crimeans in terms of deposit safety,” the Russian Deputy Prime Minister Dmitry Kozak said on May 27. “All deposits can be exchanged for rubles at any time.”

Officials say there are no problems with ruble circulation in Crimea. There is a sufficient amount of currency to provide for the peninsula’s needs, Crimea’s First Deputy Prime Minister Rustam Temirgaliev said, adding Crimea received ruble cash on a daily basis.

According to the Central Bank of Russia (CBR), Crimea had offices and branches of 80 Ukrainian-licensed banks at the time of accession to Russia, including two independent Crimean banks - a total of about 1,000 branches. From May 7, all Ukrainian banks, including the subsidiaries of Sberbank of Russia, Bank of Moscow and VTB, wound up operations in Crimea and Sevastopol on the National Bank’s instruction.

According to the CBR data as of May 20, obtaining cash with VISA and MasterCard was possible from 56 ATMs and 10 banks’ cash-dispensing offices. Setting up normal infrastructure for card transactions will take much more time, says the report.

Meanwhile, large Russian banks are not hastening to start business in the peninsula as they want to avert the US and EU sanctions. The other reason is many Russian banks are operating in Ukraine’s mainland and are unwilling to risk it for the sake of having a business in Crimea. It was already clear in May that only the Russian banks with no assets in Ukraine will be prepared to work in the peninsula.

According to Temirgaliev, nine Russian banks are now active in Crimea, among them the sanctioned bank Rossiya that bought the Crimean network of 17 branches, Genbank and Krayinvestbank. The Russian National Commercial Bank is now Crimea’s largest bank with more than 150 offices. The bank is planning to issue PRO100 plastic cards in the peninsula.

Three hundred and fifty banks offices were open in Crimea, and an ATM network was being developed, Temirgaliev reported on his Facebook account on Monday. This is a sufficient amount, he believes, as slightly more than three hundred would already be enough to ease the situation.

However, the people in Crimea cannot withdraw their deposits from Ukrainian banks now.

In late March, the Russian Prime Minister Dmitry Medvedev emphasized the need to protect the Crimeans’ savings through the Russian Deposit Insurance Agency (DIA).

“Our major and priority goal is to expand the network of Russian banks in Crimea. The Crimeans’ deposits are estimated at 90 billion rubles (about $2.57 billion),” Medvedev said. “The people’s savings should be protected, and protected under the Russian rules.”

Most of the deposits are below 700,000 rubles ($20,000) and will be compensated by the DIA, according to the Russian law. But there are deposits above this sum.

First Deputy Chairman of the State Duma Committee on Economic Policy, Innovative Development and Entrepreneurship Mikhail Yemelyanov said on Monday the Duma was planning to raise the level of unconditional insurance for Crimeans who held deposits in Ukrainian banks from 700 to 800,000 rubles (from $20,000 to $22,857).

“The entire banking infrastructure in Crimea and Sevastopol will be restored, and the key issues will be resolved by 2015,” believes the lecturer at the Institute of Natural Monopolies Vladislav Ghinko. Russian banks would anyway come to this region, as operating in Crimea promised clear benefits in the future, he told ITAR-TASS. As for the Western sanctions, the threat, the scientist believes, will gradually wane.

 

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