Som in the Russian banking system. What does this mean for Kyrgyzstan?

On the eve, the Russian State Duma passed in the first reading the bill that allows the application of Kyrgyz som for capital formation in Russian banks, insurance organizations and non-state pension funds.

As economic expert Mikhail Petrov told Akchabar this decision indicates strong economic ties between our countries.

"Russian companies will be able to use KGS to buy goods and services from Kyrgyzstan, which will make trade operations easier. In return, our republic should ensure a sufficient stock of Russian rubles for similar transactions,” Petrov said.

At the same time, the expert believes that we should not fear secondary sanctions due to working with Russia, as the restrictions adopted by the West do not significantly impact the economies of countries cooperating with Russia. On the contrary, according to him, they hit those who impose sanctions and refuse to work with the Russian market. He cited the example of Europe, which is now challenging the opposite effect, as many industrial resources, such as titanium and other metals, cannot be replaced.

Mikhail Petrov emphasizes that there are very few producers of key materials globally and bans on their purchase lead to the stoppage of production in countries.

Thus, he believes that there is no reason for Kyrgyzstan to fear sanctions, especially, he says, “the dominance of the dollar is already in the past. If it continues to look back, Kyrgyzstan will lose one of its most important partners in economic turnover.

"The biggest and most serious economic growth we evidence is when we trade and move the economy together with Russia. If we stop, our growth will stop. In this regard, I think the policy of the National Bank is short-sighted, because by banning transfers from and to Russia, our economy suffers,” Petrov continued.

He added that we need to enter the system of direct relations between central banks. This is the BRICS Bridge system and the system of central banks' asset exchange where there is no intermediate currency.

"The collateral asset is gold and we have enough of it. We must accumulate gold assets to improve our rating in the BRICS Bridge structure. The more gold assets are accumulated, the fewer problems we will have in exchanging our soms for any other world currency,” he said, emphasizing that the som is one of the most undervalued currencies today.

Mikhail Petrov explained that the KGS is “very well backed by gold” and other natural resources, including metals and lithium-ion reserves. These resources make our national currency a stable asset that can become “harder than the Swiss currency” if properly managed.