The Bank of Russia, the country’s central bank, has surprisingly announced a fixed price for buying gold with roubles. With a price of RUB5,000 (£45.12) for a gram of gold, to my knowledge it’s the first time that a nation’s currency has been expressed in “gold parity” since Switzerland decided to stop doing so in 1999.
Enacting gold parity was common practice by the world’s major powers for facilitating international trade payments in the era of the gold standard in the 19th and early 20th centuries. The same was true in a slightly different way during the Bretton Woods era from 1944 until 1971, which was when US President Nixon decided to end the system by removing the link between gold and the US dollar.
Putin’s new arrangement is envisaged, initially, to hold from March 28 to June 30. It is the latest in a series of rouble-related moves by the Russians, starting with the announcement on March 23 that they would only accept roubles for European gas instead of euros and US dollars. I predicted that Russia would at least extend this policy to oil, but it has gone further and signalled an intention to make it apply to all the commodities it exports (others include wheat, nickel, aluminium, enriched uranium and neon).
