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New $100 Banknote Worries Some In Former Soviet Union

  • Stephanie Baker

Prague, Jan. 31 (RFE/RL) -- "Your money matters," says the United States government to nervous Russians, Kazakhs and Ukrainians who are increasingly concerned about the introduction of the new $100 U.S. banknote.

The slogan is part of a massive public education effort to persuade uneasy dollar-holders throughout the former Soviet Union that the new bills will not invalidate old notes.

The new banknote is expected to be introduced worldwide at the end of February or beginning of March. The exact date will not be announced until two weeks before the introduction.

The new notes are designed to prevent the spread of counterfeit $100 bills. It features a larger portrait of Benjamin Franklin, moved off-center to make room for a watermark that can be seen when held up to the light. A special color-shifting ink will cause the numeral 100 in the lower right corner to look green when viewed straight on, and black when viewed at an angle. Familiar features will be kept, such as the size and color of the note, and the motto, "In God We Trust."

The introduction of new bills is unlikely to cause a stir in the United States, where notes printed as far back as 1928 are still fully accepted. But in places like Russia, the planned move has already sparked panic.

Russia has more cash dollars in circulation than any other country outside the U.S. More than $100 million is estimated to come into the country every day, and it is said that about $20 billion is currently in circulation. Experts say that about 80 percent of notes are $100 bills.

It's not just black marketeers who have the jitters. The $100 bill is held by many in "under-the-mattress" savings, from Kiev to Almaty. The dollar also is often used to pay for a variety of transactions in what has always been a "cash economy." Although retail trade in dollars is illegal, many shops and restaurants have exchange booths that can be used for purchases.

To calm nerves, the U.S. Treasury Department has begun flooding Russia, Ukraine and Kazakhstan with posters, brochures and advertisements explaining that "100 dollars is always 100 dollars." A special effort is being made to train bank tellers to be able to recognize the redesigned bill.

U.S. Ambassador to Russia Thomas Pickering has repeatedly reassured Russians that all old notes would be valid at full face value "forever."

U.S. embassies in Kiev and Moscow launched hotlines this month to field questions from journalists and anxious dollar-holders. A special U.S. treasury information telephone line was set up in the Kazakh capital of Almaty.

In Moscow, about 150 people a day are calling the hotline for guidance on what they should do with their old notes. The number of calls is expected to increase significantly as the date of introduction nears.

The U.S. government says that it will not devalue the old notes, and that there is no need to exchange old hundreds for new hundreds. It says that old bills are as good as new.

But in some parts of the former Soviet Union, bills dated before 1990 are already becoming difficult to use, except in a bank.

A spokesman for the U.S. embassy in Almaty, Michelle Logsdon, told RFE/RL that there currently is not much of a panic in Kazakhstan. She said that it could be because so few people know about the new banknote.

Logsdon also said that people in Kazakhstan tend to be "wary" of the switch to the new notes because this is reminiscent of past trade-in schemes, when many Kazakhs had to exchange old Russian rubles for the country's new currency, the Tenge, virtually overnight. But she pointed out that banks will always accept old dollar notes at their full value.

It is unclear whether Kazakh banks will charge a fee for exchanging old notes for new ones. But in Russia there is so far no limit on how much banks can charge.

Last month, the Central Bank reached a "gentlemen's agreement" with nine commercial banks to limit the commissions to two percent, after wide-spread rumors that many exchange points would be charging up to 20 percent for exchanging the old bills for new ones.

But the agreement has come under criticism. The president of Russia's Confederation of Consumers' Unions, Aleksandr Auzun, complained that the two percent commission will enable the commercial banks to earn profits of up to $320 million, out of the $16 billion worth of $100 notes that Russians now hold.

A U.S. embassy spokesman in Moscow, Richard Hoagland, told RFE /RL that the fees are necessary to pay for the security and other costs involved in transporting such a large amount of currency into the country. He says the nine commercial banks are unlikely to make a significant profit from the new bill, if any at all.

Hoagland dismissed the possibility that the fees would undermine confidence and drive down the value of the old bills. He says the public education campaign appears to be working. But he admitted: "In Russia, you always expect the unexpected."