Draft:Monetary system of the Russian Empire (1885–1896)

The monetary system of the Russian Empire (1885–1896) comprised the main currency—the paper rouble—and a subsidiary currency—the metallic gold rouble. The exchange rate between these two currencies was determined by the market. The use of gold currency was permitted only in foreign trade. Officially, the paper rouble was referred to as a credit note (i.e., a banknote exchangeable for coin) and was considered a silver currency, with its rate against gold being fixed, thus making the monetary system legally bimetallic. In practice, however, the state did not exchange credit roubles for either gold or silver, and full-weight silver coins were withdrawn from circulation. The paper rouble was supplemented by subsidiary underweight silver coins and copper coins. The system began operating in 1885, following a minor devaluation of the gold rouble, and ceased in 1897 when it was converted into a monometallic gold monetary system.

Background of the 1885 monetary system

1 rouble of 1842 with indication of pure silver content. Since 1860, the silver rouble, as well as all full silver coinage, disappeared from circulation

Since 1843, Russia had a monetary system featuring full-weight silver and gold coins (imperials, chervonets), as well as state credit notes freely exchangeable for both types of coins. The primary monetary unit was the silver rouble, which since 1762 contained 4 zolotniks 21 dolya (17.995 grams) of pure silver, equating to a silver price of 5.557 kopecks per gram. The ten-rouble gold imperial, since 1763 (valued officially at 10 roubles 30 kopecks from 1839 to 1869), was minted with an 88 zolotnik purity (approximately 917 metric), containing 2 zolotniks 78 dolyas (11.988 grams) of pure gold, which translated to 1.199 grams of gold per rouble and 83.403 kopecks per gram of gold. The nominal value of the gold imperial was expressed in silver roubles. The gold-to-silver ratio based on the nominal coin rate was 1:15, and with an official 3% premium, 1:15.45, roughly corresponding to the global market ratio (for instance, France had an official ratio of 1:15.5).

The monetary system was transitional, combining elements of silver monometallism and bimetallism. On one hand, the value ratio between silver and gold was legally fixed, both metals were freely mintable, the treasury was obliged to accept gold coins for all payments, and silver and gold coins were approximately equally circulated in the monetary reserves and transactions, indicative of bimetallism. On the other hand, the law recognised gold coins as an optional currency, used in private transactions only with mutual agreement. Additionally, the nominal value of gold coins was 3% lower than the rate at which the treasury issued and accepted them, potentially indicating a reserved state right to alter this rate in the future. In the public eye, the coin and banknote silver rouble was a continuation of the pre-1843 silver coin rouble. These factors led to the perception of Russian currency circulation as silver monometallism.

In 1854, Russia's banking system began to face difficulties: with the onset of international tensions preceding the Crimean War, the rouble's exchange rate against European currencies fell, prompting the public to actively exchange credit notes for coins. The government responded by introducing various restrictions on the amounts and conditions of exchanges, mainly concerning gold coins. Finally, in 1858, the exchange of credit notes for gold and silver was completely halted. Credit notes became fiat money, with their value against silver and gold determined by the market. The metal in gold and full-weight silver coins now exceeded their nominal value, causing these coins to disappear from domestic circulation, being viewed as bullion. The treasury continued to use imperials to pay coupon income on state loans denominated in gold. From May 1862 to November 1863, in an attempt to restore metallic currency circulation, the government exchanged credit notes for sound coins but abandoned the effort once the exchange fund was exhausted. Formally, the rouble remained credit-backed, but in reality, it became fiat.

In 1877, the state required customs duties to be paid in Russian gold coins, establishing the currency system that, with minor modifications, would remain until 1897. This system was dual-currency with a floating exchange rate (often referred to as a premium) between the paper rouble, the main currency, and the gold coin rouble, a special currency for foreign trade. The silver rouble, formally the primary monetary unit, effectively disappeared from circulation, used only for accounting purposes.

Bimetallic currency circulation in Russia ceased due to insufficient state finances. Restoring it became impossible for another reason: from the early 1860s, global silver production increased, and new technologies reduced its cost. As a result, silver, historically priced to gold at 1:15, began to depreciate from the late 1860s. The price fell sharply in the 1870s and 1880s to 1:18 and 1:20, respectively, and from the early 1890s, it declined steadily, reaching 1:30 within 5-7 years. By the early 1870s, countries with bimetallic currency systems stopped free silver exchange, transitioning to the gold standard.

Fiat currency circulation during its second period in Russia (the first associated with assignats, the second covering 1858-1896) also occurred in other developed countries. In France, fiat money circulated from 1848-1850 and 1870-1878, in Austria from 1848-1892, and in Italy from 1866-1881; in 1892, Italy failed to maintain free exchange of banknotes for gold and reverted to fiat currency. During certain phases of fiat circulation in these countries, a parallel gold currency existed, similarly to Russia. In the USA, fiat dollars (greenbacks) appeared in 1860, with circulation limited and exchange rates aligned with gold dollars by 1879.

In 1885, Russia’s monetary system was modified. The gold content in imperials was reduced from 11.988 grams to 11.614 grams (by 3.1%), increasing the silver-to-gold ratio to 1:15.495. This ratio was adopted for the nominal value of coins in the bimetallic systems of European countries (by then largely reformed to gold standards). The gold content in coins increased from 86.8% to 90% by weight, and the silver content in full-weight silver coins decreased from 91.7% to 90%, aligning with continental European standards. This allowed Russian coins to be reminted into foreign coins (and vice versa) without refining and alloying costs, enhancing their appeal for international trade

The Monetary System of 1885

Formal legal structure of the monetary system

Money

The primary monetary unit was the silver rouble, issued as state credit notes, gold coins (imperials), and full-weight silver coins. The rouble contained 4 zolotniks 21 dolya (17.995 grams) of pure silver, with the price of silver set at 5.557 kopecks per gram. The ten-rouble gold imperial contained 2 zolotniks 69.36 dolyas (11.614 grams) of pure gold, equating to 1.1614 grams of gold per rouble and 86.103 kopecks per gram of gold. Although the imperial was physically a gold coin, its nominal value was expressed in silver roubles. The gold-to-silver ratio based on the nominal coin rate was 1:15.495.

Credit notes were theoretically issued in denominations of 1, 3, 5, 10, 25, 50, and 100 roubles; however, the 50-rouble note was not in actual circulation. Gold coins were minted in denominations of 10 roubles (imperial) and 5 roubles (half-imperial). Gold coins were composed of 90% gold and 10% alloy metal (copper), making them 1.111 times heavier than their gold content. Full-weight (bank) silver coins were minted in denominations of 1 rouble, 50, and 25 kopecks. Silver coins contained 90% silver and 10% alloy metal (copper), making them 1.111 times heavier than their silver content. Full-weight silver coins were accepted for all payments (without the second party’s consent) up to a sum of 25 roubles per payment.

The treasury was obliged to mint gold and full-weight silver coins from metal brought by private individuals (so-called free coinage). Gold coins were minted upon private requests for 0.96% of the nominal gold price (136 roubles per pood of pure gold), and silver coins for 6.59% of the nominal silver price (60 roubles per pood of pure silver), excluding technical costs for gold purification. The gold-to-silver minting ratio was 1:16.43.

Subsidiary coins were made from silver (underweight coins) and copper. Subsidiary silver coins were minted in denominations of 20, 15, 10, and 5 kopecks. These coins were composed of 50% silver and 50% copper. The pure silver content in subsidiary coins was half that of full-weight (bank) coins—8.998 grams per rouble. Copper coins were minted in denominations of 5, 3, 2, and 1 kopeck, as well as half and quarter kopecks. One rouble in copper coins weighed 327.61 grams. Subsidiary coins were accepted for all payments (without the second party’s consent) up to a sum of three roubles per payment.

The state was not required to maintain a metallic reserve against the issued credit notes and did not limit their issuance by any pre-announced rules; each issuance of credit money was approved by a special legislative act, subject to publication. The issuance of gold money, due to the existence of the free coinage system upon private request, did not require legislative approval.

The theoretical parity value of the gold rouble in major world gold currencies was as follows:

• 59.12 British pence (with 240 pence in a pound),
• 4.00 French francs,
• 3.24 German marks,
• 1.92 Dutch guilders,
• 3.81 Austro-Hungarian crowns (from 1892),
• 0.773 US dollars.

Conversely, the theoretical parity value of these gold currencies in gold roubles was:

• 4 roubles 06 kopecks per pound,
• 25 kopecks per franc,
• 30.87 kopecks per German mark,
• 52.08 kopecks per Dutch guilder,
• 26.25 kopecks per Austro-Hungarian crown,
• 1 rouble 29.4 kopecks per US dollar.

In 1888-1889, credit notes with denominations of 1, 3, 5, 10, and 25 roubles were exchanged for new ones (issued in 1887). This technical measure had no monetary significance.

Securities with signs of money

In addition to roubles, two other types of valuable government papers, which had some monetary properties, were in circulation.

Deposit metal receipts were issued to gold miners who deposited their extracted gold at state gold refining laboratories, usually located near the gold fields. These receipts entitled the holder to receive an equivalent amount of gold coin from State Bank offices in St. Petersburg, Moscow, Odessa, Riga, Rostov, and Warsaw. The receipts were issued in denominations of 5, 10, 25, 50, 100, 500, and 1000 roubles. The receipts had no expiration date and, from April 1895, could be used in transactions between private individuals (with mutual consent) and were accepted by the state at face value for all payments, making them a limited-circulation surrogate for gold coins.

State Treasury notes (known as series) were government interest-bearing securities, yielding 4.32% annually (3.79% from 1887, 3% from 1894). The notes were issued in series with terms of 8, 6, and 4 years. Upon maturity, the notes could be either redeemed or replaced by subsequent issues under similar conditions at the discretion of the treasury. Interest on 8- and 6-year notes was paid annually via coupons, while interest on 4-year notes was paid upon redemption. The notes were issued in denominations of 50 and 100 roubles. The state (at the payee’s request) accepted the notes at face value for all payments and, starting from 1894, accepted them in all payments including the accumulated interest. The notes could be used in transactions between private individuals (with mutual consent). In 1896, there were notes in circulation amounting to 216 million roubles.

Coin circulation was regulated by the Coin Charter, while the circulation of banknotes and government securities was governed by the Credit Charter.