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Wednesday, July 24, 2013

Soviet ruble was destroyed brutally, in one day

On July 24, 1993, 20 years ago, the Central Bank of Russia announced the withdrawal of Soviet banknotes from circulation. From that day, Soviet cash was no longer valid on the territory of Russia. The reform was carried out to curb inflation in the country, but it caused huge panic in the whole nation.

The telegram from Roscentrobank, signed by chairman Viktor Gerashchenko, said: "The Central Bank of the Russian Federation, in accordance with the Law of the Russian Federation "About the monetary system of the Russian Federation" and the law of the RSFSR "About the Central Bank of the Russian Federation," to prevent multiple modifications of banknotes of the same value in circulation, and due to the sufficiency of reserves in banknotes and coins of the Bank of Russia of 1993, the circulation of government treasury bills of the USSR, banknotes of the USSR State Bank and banknotes of the Bank of Russia issued from 1961 to 1992 shall be ceased from 0:00 a.m., July 26, 1993."

Only new Russian banknotes issued in 1993, worth 100, 200, 500, 1000, 5000, 10 000 and 50 000 rubles were left in circulation, as well as metal coins of the USSR and the Bank of Russia from 1961 and subsequent years.

Companies, organizations and institutions that had cash assets subject for withdrawal were ordered to hand over their cash assets to the banks to have the money credited on their accounts.

As for Russian citizens, they had a right within two weeks, from July 26 to August 7, to exchange their money in Sberbank. However, if the amount of "withdrawable cash" exceeded the level of 35,000 rubles (back in those days it was not too much money at all), the bank would credit the excessive amount to bank deposits for a period of six months, with interest. Needless to say that after six months, those "excessive" amounts were eaten by inflation.

Foreign nationals, temporarily residing on the territory of the Russian Federation, could also exchange their money at Sberbank, but only on July 26th - the amount was limited to 15,000 rubles. Their passports would be stamped so that people would not be able to exchange their money again.

For businesses, amounts to be withdrawn were not supposed to exceed either the limit set for particular organizations, or the amount of sales proceeds received at the end of the day on July 25.
In essence, the reform was confiscatory. It was designed to limit the surplus of funds, including the influx of the ruble mass from former Soviet republics that were printing money on their own, which led to the emission of the ruble and the growth of the inflation rate as money was not ensured with goods ... By that time, most of the Soviet money had been devalued; there were many of those who were saving large amounts of money at home. The reform affected those, who were engaged in business activities and kept Soviet cash partly in Soviet banknotes.

It did not occur to anyone that the reform would be implemented so suddenly, taking into consideration the fact that official authorities would regularly deny rumors about the reform. To crown it all, the reform was launched in summer, during the holiday season, when many were away from their homes and just did not have time to exchange the money. On July 24th, when the news of the reform hit the country, people rushed to stores, trying to spend their remaining Soviet banknotes. Crowds of customers would sweep away all they could, people would line up in endless lines, and store shelves were emptied in several hours.

The day after the brutal reform, many people found themselves literally robbed by the state as the money that they could not exchange was worthless. 

Subsequently, due to serious public concerns, the Central Bank of the Russian Federation was forced to extend the deadline for the exchange.

"We wanted the best, but it turned out as always," then-Prime Minister Viktor Chernomyrdin said at a press conference held on August 6, 1993.

As many as 24 billion banknotes were withdrawn in the course of the reform. 

One of its consequences was the introduction of national currencies in the countries of the CIS. Curiously, the old Soviet money that came out of circulation in Russia, was still used as means of payment in the republics of the former Soviet Union. A few years later it became known that trucks would carry Russian and Soviet rubles out of new "independent" states, the Baltic states, for instance, bypassing laws, to exchange them for the new currency.

Margarita Troitsyna