Identifier
Created
Classification
Origin
09ASTANA441
2009-03-13 06:13:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Astana
Cable title:  

KAZAKHSTAN: PRESIDENT NAZARBAYEV CALLS FOR NEW WORLD

Tags:  PGOV PREL ECON EFIN KZ 
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UNCLAS SECTION 01 OF 03 ASTANA 000441 

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB

E.O. 12958: N/A
TAGS: PGOV PREL ECON EFIN KZ
SUBJECT: KAZAKHSTAN: PRESIDENT NAZARBAYEV CALLS FOR NEW WORLD
CURRENCY

ASTANA 00000441 001.2 OF 003


UNCLAS SECTION 01 OF 03 ASTANA 000441

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB

E.O. 12958: N/A
TAGS: PGOV PREL ECON EFIN KZ
SUBJECT: KAZAKHSTAN: PRESIDENT NAZARBAYEV CALLS FOR NEW WORLD
CURRENCY

ASTANA 00000441 001.2 OF 003



1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: At the second annual Astana Economic Forum on
March 11, President Nazarbayev called for a new world currency and a
"more accountable" monetary policy and urged world leaders to take
this up at next month's G-20 summit in London. Nazarbayev
essentially blamed U.S. monetary policy for contributing to the
global financial crisis, saying, "The country that issues the de
facto world currency shows no responsibility to consumers and
infringes on the rights of the majority of the world's countries."
He added that the current global financial system lacks clear,
consistent rules and called for new laws and institutions to provide
a framework for a more stable currency regime. Nazarbayev also
suggested that the countries of the Eurasian Economic Community
could begin by introducing a new regional currency as they move
towards establishing a regional customs union. Nobel Prize-winning
economist Robert Mundell, speaking shortly after the president,
supported Nazarbayev's proposal for a new global currency, although
he cautioned that it would be difficult to implement. Nazarbayev
originally proposed these ideas in an article published in Russia's
"Rossiskaya Gazeta" on February 2. END SUMMARY.

"KEYS TO THE CRISIS"


3. (U) On February 2, President Nazarbayev authored a nine-page
article in Russia's "Rossiskaya Gazeta," describing his plans for
overcoming the current economic crisis. Entitled "Keys to the
Crisis," the article argued that the current crisis is unprecedented
in human history and therefore demands unconventional ideas and
innovative solutions, free from "old dogmas and stereotypes."
Although Nazarbayev wrote that it would be "unproductive" to assign
blame for the global crisis on any one nation, actor, or event, he
nevertheless suggested that the "existing, de facto world currency"
(i.e., the U.S. dollar) is illegitimate because it is not supported
by an international law or treaty signed by the leaders of the
majority of countries and ratified by a majority of the world's
parliaments.

A MORE "CIVILIZED, ACCOUNTABLE" MONETARY POLICY



4. (U) Nazarbayev also wrote that the "activities of the issuer of
the de facto world currency are not democratic," because there is no
popular participation in the monetary policies of the U.S.
government. Furthermore, he argued that the global currency market
is not competitive or "civilized," since there are no global
institutions that establish and enforce rules for fair play by all
of the actors in the market. He also contended that those in charge
of U.S. monetary policy were "unaccountable" to the countries,
companies, and citizens of the world community, "and that is what
generated the global crisis." Nazarbayev proposed the creation of a
World Currency Court of Arbitration to hold "the issuers of the de
facto world currency" accountable to the world community for their
decisions.

FROM "DEFECTAL" TO "ACMETAL"


5. (U) Calling the current world currency "obsolete" and
"defective," Nazarbayev suggested, perhaps with tongue in cheek,
that the name of the U.S. dollar be changed to the "defectal," a
combination of the words "defective" and "capital." He then
proposed the creation of a new world currency and suggested it be
called the "acmetal," based on the Greek word "acme," meaning peak
or best, and "capital."

A PASSIONATE PLEA FOR RADICAL RENEWAL


6. (SBU) Opening the second annual Astana Economic Forum on March
11, President Nazarbayev reiterated many of the arguments in his
April 2 article. (NOTE: Despite the economic crisis, the Forum was
a lavish affair held at the new Palace of Independence and attended
by more than 1,000 participants from government, industry, and the
diplomatic corps. Including airfare and per diem costs for several

ASTANA 00000441 002.2 OF 003


prominent foreign speakers, we estimate the cost of the event to be
in excess of $1 million. END NOTE). Nazarbayev said that the
economic models currently in vogue were created in the 18th century
and are as obsolete as the steam engine. He also dismissed most
attempts to reform the financial system as "cosmetic repairs" that
would not address the root causes of the crisis. Urging the
audience to embrace his proposal for a new global currency and new
international regulatory institutions, Nazarbayev said, "Unless we
achieve a radical renewal of the basic economic paradigm, the world
will have little chance to survive."

OBLIQUE CRITICISM OF U.S. INFLUENCE


7. (U) Nazarbayev told forum participants that global market
participants are unwillingly "forced to abide by rules imposed on
them by others," a clear reference to the United States. He further
complained that a "narrow circle" of monetary policy makers sets
rules and makes decisions that "often violate the majority's
interests" and he urged the leaders of the G-20 countries to
consider his proposal to establish a new world currency system under
the aegis of the United Nations that, in his opinion, would ensure a
more stable, competitive, civilized, and accountable financial
system. He also said that the "de facto world currency" is not
legal because it was never approved by international treaty and
contended that "the system for supplying the de facto world
currency" is not "democratic, competitive, or free."

A NEW EURASIAN CURRENCY


8. (U) Nazarbayev proposed that the countries of the Eurasian
Economic Community (Eurasec) take the initiative by introducing
their own regional currency. "A single, supranational, cashless
currency could be introduced" in Eurasec that, he opined, would not
be dependent on the volatile fluctuations of other world currencies.
Nazarbayev suggested that the currency be called the Euras or
Eurasia and noted that Kazakhstan first proposed the idea of a new
supranational currency in 2003, at that time to be called the
"altyn."

CUSTOMS UNION EXPECTED TO DRIVE GROWTH


9. (U) In his speech, Nazarbayev stressed the importance of
maintaining solidarity and common cause among the countries of
Eurasia. At one point, he said rather pointedly, "One cannot expect
outside assistance in the present situation: the donors of
yesterday and those who used to teach us how to live and how to
govern, now have to resolve their own large problems. If we don't
take care of ourselves, nobody will," he said. He then suggested
that the proposed Customs Union among Kazakhstan, Belarus and Russia
would help lead countries in the region out of the crisis, and
lamented that Ukraine was unlikely to join the Union. "Simply put,"
he said, "these four states, which account for 85 percent of the
economy of the former Soviet Union, could become a locomotive of
assistance to other members of the CIS."

SURPRISING SUPPORT


10. (U) President Nazarbayev anticipated that his proposal might
not be widely accepted, at least initially: "I understand that for
an unprepared audience, the idea of creating a global currency may
sound too daring," he said, "but my conversations with the prominent
participants of this forum have convinced me that this basic idea is
not out of the ordinary," Nazarbayev said. Indeed, he received
strong and surprising support for his plan from an intellectual
architect of the euro, Nobel-prize winning economist Robert Mundell.
"I must say that I agree with President Nazarbayev's statement and
many of the things in his plan for a new world currency," Mundell
said, adding that the idea held "great promise." Mundell
acknowledged that it would be very difficult to achieve the
"political integration" necessary to implement a new world currency
and admitted that abandoning current national currencies and
switching to one single currency would not be feasible. He also

ASTANA 00000441 003.2 OF 003


argued that not all countries should be forced to follow the same
monetary policy rules, due to their significant differences in size
and complexity. (NOTE: The other Nobel laureate flown in for the
Forum, Edmund Phelps, was less enthusiastic, saying the proposal
deserves "further study." END NOTE).

NOT-SO SURPRISING SUPPORT


11. (U) On February 10, several days after the appearance of
Nazabayev's article in "Rossiskaya Gazeta," Russia's ambassador to
Kazakhstan, Mikhail Bocharnikov, said in a press interview that,
"The creation of a common world currency under the aegis of the
United Nations is quite possible." Bocharnikov suggested starting
with the creation of a regional currency first, based, not
surprisingly, on the ruble. "As for Russia, we support the
president's proposal," he said. "The first practical attempt in
this direction would be the movement to the (Russian) ruble as a
common unit of accounting between Belarus and Russia," he said.


12. (SBU) COMMENT: Regardless of the merits of President
Nazarbayev's proposal for a new world currency, three points are
worth noting: (1) the proposal effectively criticizes the U.S.
government and U.S. financial institutions for acting without care
or concern for the welfare of others around the globe; (2)
Nazarbayev first announced his proposal in the Russian media,
signaling a desire to garner Russian popular, intellectual, and
political support; and (3) the proposal to establish a Eurasian
regional currency is presented in the context of broader regional
Eurasian integration, including the creation of a Customs Union with
Russia and Belarus, that may not be in the long-term interests of
Kazakhstan. END COMMENT.

HOAGLAND