Dear ladies and gentlemen, let me introduce myself. My name is Vadim Kapustkin. I'm Associate Professor at World Economy Department, St. Petersburg State University, and I'm pleased to share with you the model on number 3 which is dealing with legal aspects of doing business in Russia. The first part of the model is dealing with the foreign exchange and monetary collection in Russia. Let us consider a content which will include the Russian national currency, Russian foreign exchange reserves, exchange rate regime, Russian national currency convertibility, monetary and foreign exchange limitations, and the regulation institutions. First of all, let us deal with Russian national currency. I hope most of you inform that the Russian national currency has a name ruble. In Russian language is rubl. Plural, it will be rubli. Ruble has its international code, RUB. The former one was RUR, and this is official tender currency of the Russian Federation. It is used also in some other territories including Abkhazia and Southern Ossetia which recognized by Russian Federation as a sovereign states, but not recognized by majority of other countries, and could be used also on the territories of Eastern Ukraine right now. The origin of Russian ruble is dealing with a Russian word rubit, which in English is to cut. The reason why Russian ruble is having that kind of origin dealing with the simple way of production of ancient rubles, which were produced out of bigger piece of silver, which is called Greenland. Greenland was cutted in a parts which due to their way of production start to be called rubles. So they were not originally the coins, but just the pieces of silver. The small denomination of Russian national currency is called kopeika, and it also has quite a special origin of its name which is dealing with the English word spear, which in Russian is kop'e. In that case, the origin of the name of small Russian currency dealing with the picture of St. George killing the dragon which appearing at the overs of Russian kopeikas. In ancient times, people were not sure how St. George killed the dragon. Some people were thinking that the dragon was killed by sword. Some people were thinking that St. George was killed by a spear. Finally, the first Russian coins was bearings St. George picture in the two ways. I meant it in two ways, so one with spear and one with a sword. Later, the ones with the spear disappeared. But then distinguished feature of the first coins with the spear stuck at the name of the small Russian currency. So it's called kopeika since that. Now I'll ask you to think about the origin of your national currencies. Speaking about official exchange reserves, this is the second sub-topic of part 1. We have to think first of all why any nation needs the reserve in the foreign currency. There are few functions which are important to consider, the reason to keep reserves in the foreign currency. First of all, the ability to make interventions by the central bank or any other organ playing the similar to Central Bank role while having their substantial reserves in the foreign currency helping the central bank to sale sometimes the foreign currency in exchange of local currency, and doing that way to increase the level of exchange rate of the local currency. Another reason, to keep some reserves in foreign currency dealing with the official needs of the government of any single country to pay or to offer loan in foreign currency. For that reason, the government normally is borrowing foreign currency from the foreign exchange reserves. There is also one important feature which foreign exchange reserves are playing, especially in developing country transition economies, the psychological role of foreign exchange reserves. Because if the country is having substantial foreign exchange reserves, that normally means that this country is not easy target for speculators which are trying to play against that local currency. Then bigger is the foreign exchange reserve, then less attractive the national currency for speculators, specifically for the bears who want to play against their local currency to get its exchange rate lower. Also, it is important to mention another function on the sterilization of extra expert earnings. This particular function is very important for some nations which dislike to have high level of own currency exchange rate. That's specifically important for China and Japan, Switzerland, which are having very big foreign exchange reserves due to that fact. Now let's have a look at the picture which shows the fluctuation and volatility of Russian official exchange reserves starting from the beginning golden millennium till now. The official history of Russian foreign exchange reserves started since 1993. Then the central bank start to make a records. The first record is shown at the slide, just less than five billion US dollar, four and a half. Then in August 1997 just before their Asian crisis, Russian foreign exchange reserve went up to about 25 billion. But as a result of Asian crisis, and later, especially Russian financial crisis, in the beginning of 1999, the reserves have been decreased substantially to the level of 11 billion. But it start to grow in new millennium. In January 2003, as you can see, it was already closer to 50 billion. Later, we can easily see the negative impact of the global financial crisis, 2008, 2009, and the most significant drop in our reserves appeared. Then substantial increase after the crisis. Then another decrease since 2014 dealing with substantial drop in international oil prices and contradictions with the western countries and the sanctions. While considering Russian ranking among the major holders of foreign exchange reserves, we can see that Russia is now keeping position number 5. So it's at top fifth nation with the biggest foreign exchange reserves. Ahead of Russia, there are only China, Japan, Switzerland, and Saudi Arabia. Speaking by the content of foreign exchange reserves of Russian Federation, we have to consider that right now, the process of dedollarization of our reserve is going on. In the beginning of millennium, 85 percent of Russian foreign exchange reserves belong to US. Currently, right now, that share is decreasing, and now it's less than a half. In exchange to that, the Russian government is trying to diversify the reserve, increasing the share of euro, and the share of some other currencies including Chinese renminbi, the Chinese yuan, which share now is three percent. Speaking about the Russian official gold reserves, which is also playing some important role right now, the share of gold in official reserves of Russia is about 18 percent. In the slide, you can see that steady growth of Russian foreign exchange reserves, and the gold reserves in particular. The gold reserves of Russia suffered quiet a tragic history at the age of 1980s, 1990s. In the Soviet times, the level of Russian gold reserves was over 2,000 tonnes, but it shrink tremendously at the end of '80s and the beginning of '90s during the last period of the Soviet Union, and the initial period of the existence of post-Soviet Russia, and finally, the reserves shrink to the level of just 300,000, which was seven times lower compared to the Soviet time record. Since that time, Central Bank of Russia is trying to put a lot of efforts to increasing the level of official gold reserves, especially since the new millennium, and you can easily see that specifically after there. The meet of first decade of the new millennium, the growth of gold reserve start to be quite fast. Right now, the gold reserves reached the record of the Soviet time.
