Encyclopedia of Money: Tzarist Russia’s Paper Money

Of the European countries only Sweden beat Russia to the punch on the issuance of government-sanctioned paper money inconvertible into precious metal. Perhaps it is no accident that Russia first saw paper money under Catherine the Great (1762– 1795), whose wars broke the power of Turkey and made Russia a player among the powers of Europe. The first issue of paper money, called roubles-assignats appeared in 1768 to help finance the first Turkish war. Russia termed its paper money assignats before the French issued their own more-famous assignats during the French Revolution, which fueled one of the great hyperinflation episodes in history.

The government created two note-issuing Assignation Banks to issue the notes. The supply of assignats swelled as Catherine fought a second Turkish war and wars with Sweden, Poland, and Persia. For the first two decades the bourse exchange rate between assignat rubles and silver rubles traded close to par. Toward the end of the century the assignat rubles were trading at a 30 percent discount, and fluctuated around that level until the Napoleonic struggles increased the government’s dependence upon paper money. By 1811 a silver ruble equaled 3.94 assignat rubles. The victory over Napoleon brought some improvement in confidence but the trading range remained between 3 and 4 assignat rubles per silver ruble for the following three decades.

Between 1839 and 1843 Russia, under Nicholas I, reformed its currency and issued new silver notes convertible into silver at a fixed rate. The assignat rubles were traded for the new silver notes at a rate of 3.5 to 1.

During the Crimean War (1854) the supply of paper rubles doubled and Russia suspended convertibility of its silver notes. The value of the ruble remained uncertain and fluctuated until the period 1868 through 1875, when the government succeeded in propping up the ruble. Again, a war disrupted best-laid monetary plans during the Turkish war of 1877 and 1878.

Until the adoption of the gold standard (1897–1899) the ruble traded at a modest 30 percent discount, but fluctuated sharply in foreign exchange markets, scaring away potential foreign investment. Russian adopted the gold standard to attract foreign investors and bring in badly needed foreign capital.