BAKU: Karabakh set to print own money – Azeri paper

Karabakh set to print own money – Azeri paper

Ekho, Baku
10 Jul 04

The Azerbaijani newspaper Ekho has announced alleged plans by
Azerbaijan’s breakaway region of Nagornyy Karabakh to print its own
money. It says that the US-based Educational Coin Company is offering
NKR banknotes to international collectors. Ekho quotes an Azerbaijani
pundit as saying that by printing its own money the NKR is seeking
material evidence to flesh out “the myth of the NKR”. The manat
remains the only legal tender on Azerbaijani territory, including
Nagornyy Karabakh, says the governor of the National Bank of
Azerbaijan. Subsequent to this, a report from the Armenian news
agency Arminfo said that the head of the NKR government press service,
David Mikaelyan, had described Ekho’s report as “extremely
frivolous”. He said that the NKR was in a common economic zone with
Armenia and has a common currency with it – the dram. The following is
the text of N. Aliyev and N. Quliyeva’s report by Azerbaijani
newspaper Ekho on 10 July headlined “Separatists are minting their own
money”. Subheadings have been inserted editorially; all quotation
marks and ellipses as published:

Karabakh plans separate currency

Separatists in [Azerbaijan’s breakaway region] Karabakh are preparing
to circulate their own currency with the same name as the Armenian
dram. Thus,the NRK [Nagornyy Karabakh Republic] may be the first
unrecognized entity on CIS territory to get its own money. Nothing of
this kind has been seen in the Dniester region, Abkhazia or South
Ossetia. The money is available in printed form. The Ekho editorial
board has pictures of two denominations, two drams and 10 drams,
available and has sent them to the National Bank of Azerbaijan
[NBA]. The paper money was printed for the NKR this year. There is no
reliable information about the company which assumed the
responsibility to issue cash for separatists. Nonetheless, Ekho has
found out that the Educational Coin Company based in New York is
currently promoting the new “currency” among collectors of paper
money. In all likelihood, this particular firm is directly connected
with the printing of “Karabakh money”. At the same time, Armenia
itself has its money printed in Europe. Probably, Xankandi
[Stepanakert] decided not to “fail” official Yerevan and refused to
use the services of Armenia’s European partner.

In a profile of its activity, the US-based Educational Coin Company
says it has 40 years of experience in supplying inexpensive world
coins and banknotes to be used as articles for resale, awards and as
“educational decorative components”. In any event, this or any other
company had no legal right to take on an order from separatists. Ekho
has learned that there are no uniform regulations for printing paper
money or minting coins.

Decision said “political manoeuvre”

Every state is entitled to set up such a mechanism on their own based
on their legislation. In Azerbaijan, for instance, the mechanism is
determinedby the law “On the National Bank”. It reads: “ýPaper
currency of the Azerbaijani Republic is an obligation of the National
Bank and is guaranteed with all of its assets. The National Bank has
the exclusive right to issue banknotes and coins that are legal tender
on the territory of the Azerbaijani Republic, to organize their
circulation and withdrawal from circulation.” There is another nuance
of importance. The printing of money is a pretty costly pleasure
forany state. For example, it was announced earlier that Azerbaijan is
planning tospend 75bn manats (15m dollars) in 2004 on the renovation
of old notes. The printing of new ones might cost the state several
times more. To what extent is the separatist regime capable of bearing
such expenses? It is known that the “budget” of the “NKR” totals only
about several million dollars. By all accounts, the attempt to
circulate its “own currency” looks more like a political
manoeuvre. The unambiguous design of the notes supports the
idea. Thus, forinstance, the separatist money bears the “official
name” of the unrecognized entity: the Nagornyy Karabakh Republic. The
emblem contains the word Artsakh [the Armenian name for Karabakh]. The
name of the “owner and customer” of the currency is also identified at
the bottom of the note: the Ministry of Economy and Finance. This
particular structure placed the order, as the NKR has no central bank.
Instead, it has Artsakhbank, a bank registered in Yerevan. It has for
a long time described itself as the NKR central bank. When most of its
partners broke off under pressure from Azerbaijan, Artsakhbank was
forced to declare itself an Armenian bank with branches in Karabakh.

The NKR leadership chose religious themes for the design of its
money. The two dram note depicts the Gandzasar Monastery and the St
Hovanes Mkrtich [John the Baptist] Cathedral. The other side shows
John the Baptist baptizing Jesus Christ. The 10 dram note features the
Dadivank Monastery. The other side shows patterns of a Karabakh
carpet, bunches of grapes and the Xudafarin bridge over the River

Azeri National Bank probes report

The latter circumstance is especially curious. The bridge is located
in Azerbaijan’s Cabrayil District which is occupied by Armenia. It is
outside the geographical limits of the former Nagornyy Karabakh
Autonomous Region. Thismeans that the separatists have no plans to
return Cabrayil. It should be pointed out here that Armenia’s national
emblem features Mount Ararat which is located in Turkey. Armenian
drams have circulated in Karabakh until now. By issuing their own
“currency”, the separatists probably decided to additionally reduce
its exchange rate to the dollar. Currently, one dollar sells for about
540 drams in Yerevan. So the real value of two and 10 dram notes is
not high in Armenia. NKR separatists hope that their “own currency”
will get stronger as it comes into circulation.

“The introduction of an internal currency in the separatist NKR is the
funniest Armenian joke I’ve ever heard,” a well-known political
analyst, Eldar Namazov, commented on the situation for Ekho. He sees a
possible explanation for the separatists’ actions in a “pathological
ambition of Armenians to attach material evidence to the myth of NKR”.

As regards official reaction from the Azerbaijani regulator of money
printing, the National Bank of Azerbaijan, it was predictably
sharp. Ekho has learned that the National Bank of Azerbaijan had been
advised on the separatists’ plans to print their own money, but the
bank did not believe it was a serious project. Nonetheless they
launched a probe. “We have been receiving some data that need
verification. I’ve seen sketches that you provided and ordered that
the inscriptions on the notes be translated from Armenian,” Elman
Rustamov, the head of the National Bank of Azerbaijan, has told
Ekho. In his view, this might be just another separatist
provocation. Rustamov is not sure such currency might come into
circulation. “The Karabakh economy now totally depends on Armenia; the
separatists would not benefit from circulating their own moneyunder
such conditions,” Rustamov said.

Azeris unhappy with currency plans

In any event, it is against the law to print “Karabakh” money because
under the constitution, it [Karabakh] is Azerbaijani land where the
manat is the only legal tender. “It’s an outrage on justice,” Rustamov
said in conclusion. The design of most national banknotes of
Azerbaijan was drawn up in early in 1990s, at the beginning of
Azerbaijan’s independence. Later on, they underwent changes and larger
denominations were issued. Under current law, the par value, size,
weight, composition and other features of notes and coins which are
legal tender in Azerbaijan, shall also be subject to the regulatory
documents of the National Bank. It is the NBA board again that shall
decide on circulating new notes and coins or withdrawing old ones from
circulation and approve the patterns of new paper currency. According
to the law, a resolution to this effect is to be published in the mass
media, relevant decisions shall specify the time frame to replace
notes and coins and the credit organizations in charge of the
process. It is known that old notes are replaced with new ones every
four years, the last such replacement took place in 2000. The NBA has
long been placing its orders to print the manat with the UK company De
La Rue Int.

Experts have explained to Ekho that, prior to taking an order to print
paper currency, any company is obliged to make sure that the customer
has the legal right to make such an order. “For example, no autonomy
within the limits ofa state has the right to issue its own currency
without the permission of its central authorities. This is a grave
abuse of international law and no serious company would ever assume
this kind of responsibility,” a banking expert has told Ekho.

International organizations and the world community regard Nagornyy
Karabakh as part of Azerbaijan, he recalled. Therefore, any monetary
and financial transactions should be done here on the basis of
Azerbaijani legislation, he said. “Given the conflict situation on
this territory, all serious international companies and firms refrain
from any cooperation with Karabakh. No company that respects itself
will allow itself to have ties with separatists,” the expert said.