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Russians to U.S.: Give us the Fed

Russia is pressing for a global approach to U.S. monetary policy that would take the dollar out of the world spotlight.

By Peter Gumbel, Europe editor
January 29, 2009: 12:41 PM ET

DAVOS, Switzerland (Fortune) -- The Russians are upset that the U.S. dollar is the world's principal reserve currency, and this week in Davos they have been putting forward suggestions for how to fix the issue. First came Prime Minister Vladimir Putin, who called in a speech on Wednesday for efforts to "facilitate the emergence of several reserve currencies."

On Thursday it was the turn of German Gref, a former Economics Minister who is now CEO of Russia's largest bank, state-owned Sberbank. His proposal during a panel discussion went even further than Putin's: In the absence of any serious competitors to the dollar, he advocated international control of U.S. monetary policy.

The biggest risk facing the world, he said, is that the U.S. dollar plays a global role but is managed narrowly "in the vested interests of only one country." In other words, he's pushing for the U.S. Federal Reserve to be governed more like an international institution than "merely" as the U.S. central bank.

Pressed by Fortune to explain what he means, Gref acknowledged that he hasn't yet worked out the mechanisms for how Russia and other countries would have a formal say in U.S. monetary policy.

But he insisted that the dollar's status as both the U.S. currency and as a global one is "one of the three to four main reasons for this crisis." Moreover, if the situation isn't changed, "we will stay in the same international crisis."

I talked to several Russians and Russian watchers who are attending the World Economic Forum, and they say that while the Kremlin has long grumbled the dominance of the dollar, this is the first time they've heard Russian officials putting forward specific solutions - including having a say in U.S. monetary policy.

The Russians are chafing about the greenback because it has been extremely volatile over the past few years - and because their oil and gas is sold in dollars. And of course, the dollar is a potent worldwide symbol of American economic and political power, which they aren't all that crazy about either.

The Russian central bank has tried to mitigate the issue by devaluing the ruble against a basket of currencies that comprises the dollar and the euro, rather than just the dollar. When the financial crisis exploded last fall, the ruble came under heavy selling pressure.

For several weeks, the central bank tried to prop it up, but after blowing through about $150 billion to no avail, it has since allowed the Russian currency to devalue gradually. To top of page

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