Thursday, November 13, 2008
Russian Officials Weighing Gold-Backed Ruble
While the price of gold may be falling in tandem with that of oil, a major gold producing nation that also happens to be a major oil producer is considering making its own currency convertible into gold.
The currency is the ruble. Russian officials, this reporter has learned, are seriously considering proposals for a gold-backed ruble or a gold-backed special drawing right.
Also under consideration in Moscow: ideas for a currency backed by a basket of commodities, including gold and oil.
The idea of a gold-backed ruble is not new. The Soviet Union introduced an inflation-fighting gold ruble in the 1920s; but it was never redeemable for gold by the general public.
A more intriguing gold ruble scheme dates to the late 1970s when an international consortium led by Armand Hammer--the late Occidental Petroleum (NYSE: OXY) chairman who was suspected of being a Soviet agent of influence--obtained the marketing rights to specially made Soviet gold and silver coins commemorating the 1980 Moscow Summer Olympic Games. The United States and 60 other nations boycotted the Moscow games because of the 1979 Soviet invasion of Afghanistan; but the coins were marketed anyhow.
Informed sources say one of the consortium partners, David Karr, a controversial U.S. financier who was closely associated with Dzherman Gvishiani, the son-in-law of Soviet Prime Minister Aleksei Kosygin, proposed using the coin marketing enterprise as a platform for launching a gold bullion Soviet coin capable of competing against white-ruled South Africa's Krugerrand (the sale of which was being banned in many countries because of apartheid).
Karr, a former U.S. Communist Party fellow traveler who was also rumored to have had ties to the KGB, died mysteriously in 1979. He was found dead in his Paris, France home--a suite in the luxurious Hotel George V --following a trip to the U.S., during which, it was subsequently learned, he testified against Hammer before the Securities and Exchange Commission. The international wheeler-dealer allegedly accused the international oil tycoon--whose business relationship with the Soviet Union began under Vladimir Lenin--of bribing Gvishiani and other Soviet officials in connection with the coin consortium and other projects.
POSTSCRIPT: Turns out, the Bolshevik battle cry, "Peace, Land, Bread," should have included gold. Click here and here for the incredible story of Lenin's return from exile on a "sealed train." It was loaded with $10 million in German gold--for the Russian revolution--according to author Michael Pearson (The Sealed Train). He writes: "The final irony was that the Germans’ investment in Lenin was returned to them—with enormous interest. Under a supplementary agreement to the Brest-Litovsk Treaty in August 1918, the new Soviet government paid the Germans 120,000,000 gold rubles—at contemporary rates of exchange more than 240,000,000 marks and far more than the Foreign Office supplied to the Bolsheviks."