#12
The Russia Journal
January 25-31, 2002
Village uses an unorthodox currency in its economy
By CHRISTOPHER KENNETH

A Russian district that has found an unorthodox solution to its social issues is now facing legal problems from the regional administration, legal experts say.

Ponazyrevsky district, Kostroma Oblast, located about 300 km from Moscow, has been running its daily financial and other economic affairs for over three years now without using the ruble or any other world currency – in the traditional sense of the word – in its economy, according to local media reports.

Nor do the residents rely on barter for their economic transactions, as the local administration has adopted a monetary system, which replaces the national currency, the ruble, with its locally printed "money-card" as the official legal tender in the district.

This unorthodox monetary system, which works on a principle similar to that used in modern electronic credit-card systems, uses a card made from a piece of ordinary cardboard, cut out in rectangular form, with the value and the owner’s name inscribed on it. Just like a credit-card system, the cards also effectively relieve the residents of the need to carry cash, according to a TV6 report.

Ivan Mantashyov, director of the Gorlovsky State Farm, the mainstay of the district’s economy, said the system was necessary to fight social evils such as alcoholism and smoking in the district.

The introduction of this currency is part of a more comprehensive anti-alcohol program, drafted by the district administration, to combat the negative trend in the district, as the local currency cannot be used to buy alcohol in any of the district’s shops, he noted.

Like most of Russia’s small and far-flung villages, Ponazyrevsky district has been devastated by alcoholism. As the decaying village offers no other alternatives to vodka, or its cheaper and more affordable homemade derivatives such as samogon, drinking alcohol has become the most popular pastime, especially among male residents, wreaking havoc both on families and productivity in the workplace.

As all official transactions, including workers’ salaries, are made in the "local currency," it has so far effectively denied most drunkards access to alcohol as shops have strict instructions not to honor the cards when alcohol is bought.

Since the launch of this system, discipline has improved considerably both in families and places of work, as alcoholism has gone down among the residents, Mantashyov added.

The system has been working without a hitch now for the past three years, he continued, emphasizing its simplicity and effectiveness. For instance, a worker receives his salary – a cardboard money-card inscribed with his name and the amount – which is then signed by the company’s director and accountant, and then countersigned using the company’s official stamp.

The worker then goes to a shop, selects whatever he wants and presents his money-card. After checking to make sure it is not counterfeit, the shopkeeper approves the sale. However, change in rubles is not given. The value of the goods is debited, and the difference is written back on the card as well as in a special register at the shop, where the card owner and the shopkeeper countersign and indicate the date of the purchase.

A shopkeeper told TV6 that since the adoption of the system over three years ago, there has never been a case of counterfeiting, as Ponazyrevsky district money-cards are adequately protected by security measures.

"Our money-card has three security levels of protection," she said.

"The first is the signature of the company’s director, which we know very well, the second is the accountant’s signature, which we also know very well, and the last is the company seal," she proudly told TV6.

The TV channel showed footage of the villagers, mostly women, praising the system. "Can you imagine a place in Russia, where all men are sober every day?" one of the women asked the correspondent.

The Kostroma regional administration, which has jurisdiction over the financially wayward district, has repeatedly ordered it to stop the practice, fearing huge financial mismanagement could be under way as the district’s general bookkeeping, including budgetary funding, does not use the ruble. But all these measures and warnings have fallen on deaf ears as both the residents and local authorities have remained committed to their new legal tender, TV6 said.

Currency and legal experts have called the practice a blow to the national constitution as well as a gross violation of Russia’s currency laws.

"Such practice contravenes a lot of legal requirements, specifically Article 75 of the Constitution of the Russian Federation, which has clearly stipulated the ruble as the sole legal tender in the country," said Maria Stepanyan, legal affairs director at the Moscow-based Fundament Bank.

"The basis, order and conditions of introducing and using foreign or any other currency in Russia, are either determined by the law on foreign currency regulation and control, or by any other authorized legal procedure," she added.