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UPDATE 3-BRIC may discuss supranational currency-Kremlin

Published 06/02/2009, 03:01 PM
Updated 06/02/2009, 03:08 PM

* Kremlin seeking reserve currency debate

* Medvedev says perception of U.S. dollar has changed

* BRIC summit planned for June 16

* Medvedev says Bretton Woods system needs reform

(Recasts to adds Medvedev comments)

By Guy Faulconbridge

MOSCOW, June 2 (Reuters) - The world's biggest emerging markets may discuss the idea of a supranational currency later this month as the economic crisis in the United States changes perceptions of the U.S. dollar, the Kremlin said on Tuesday.

President Dmitry Medvedev said a wider range of reserve currencies was needed as the crisis has shown the failings of the system set up by the 1944 Bretton Woods conference.

"The world needs more reserve currencies," Medvedev told U.S. television station CNBC, according to the text of the interview provided by the Kremlin.

"The perception of the dollar has naturally changed because of the crisis in the American economy."

Moscow in recent years has reduced the dollar's role in its reserves, which totalled $399.9 billion on May 22, and repeatedly called for the use of the Russian rouble as a regional reserve currency.

Russia, which holds the world's third largest foreign exchange reserves, has proposed the creation of a new world reserve currency that would be issued by international financial institutions to reduce reliance on the U.S. dollar.

The leaders of Brazil, Russia, India and China, known by the BRIC acronym, will meet in the Russian city of Yekaterinburg on June 16 for the first summit since the international downturn struck their economies, which had driven global growth.

A Brazilian official told Reuters last week that the summit would discuss the dominance of the U.S. dollar as well as ways to reshape the world trade system and nuclear disarmament. [ID:nLS413993]

"I do not exclude that the Russian president's idea about the creation of a supranational currency and the rouble as a (world) reserve currency will be discussed," Medvedev's spokeswoman, Natalya Timakova, told reporters.

The BRIC states are trying to strengthen their clout as the producers of 15 percent of global output by building up the grouping into a powerful world player.

CURRENCY DISCUSSIONS

"The current situation demands a bigger number of currencies which could be used for investing money and by banks, citizens and states," Medvedev said.

He said that China, which has the world's biggest hoard of foreign currency reserves, supported Moscow's idea for making the International Monetary Fund's Special Drawing Rights (SDR) the basis of a new supranational currency.

Reserve currencies also remain a theme for the upcoming G8 and G20 meetings, said deputy finance minister Dmitry Pankin.

Medvedev said Russian gross domestic product would contract by "no less than 6 percent or perhaps even more," in 2009 and called on the government to deal with difficult levels of unemployment.

When asked about the risk of global inflation soaring, he said: "In this situation there is a threat of an acceleration of inflationary processes in the world and that could result... in problems for the banking system." (Additional reporting by Toni Vorobyova, editing by Dmitry Zhdannikov and Andy Bruce)

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