On November 22, 1993, from 00:00, the circulation of the 1991-1992 specimen of 1,000, 5,000 and 10,000-ruble banknotes issued by the State Bank of the USSR and the Central Bank of Russia was suspended in the territory of the Republic of Armenia.
Agreements remain on paper
On July 26, 1993, the Central Bank of Russia put the ruble banknote specimen issued in 1993 into circulation in Russia. The website of the Central Bank of Armenia notes that “in fact, Russia pulled out of the Soviet ruble zone, leaving the other republics with ruined financial systems.”
In September 1993, an agreement was signed between a number of former Soviet republics and the Russian Federation on creation of a single ruble zone, and a bilateral agreement between Russia and Armenia, which, actually, remained on the paper. In October 1993, Turkmenistan, and in November Uzbekistan and Kazakhstan put their national currencies into circulation.
Armenia was the only one to keep the Soviet ruble in circulation, facing the risk of an unpredictable inflow of rubles.
Rubles were brought in boxes
Gevorg Tumanyan, a former employee of Cash Operations Department at the Central Bank, says:
“Unexchanged Soviet rubles from the former republics of the USSR, where the currency changed, flowed to Armenia. A special control was established at the airport not to allow large amounts of rubles be brought to the republic. People were bringing rubles in boxes. Especially the big boxes of cigarettes etched in my memory. Naturally, such a “flow” was destroying Armenia’s already affected economy, and the prices were increasing day by day.
“Things got out of control”
To develop and implement complex measures for the regulation of currency circulation, on October 13, 1993 the Supreme Council of the Republic of Armenia adopted a decision on establishing the State Commission on Regulation of Currency Circulation. Chairman of the Committee on Financial Credit and Budgetary Affairs of the Supreme Council of Armenia Tigran Sargsyan, Chairman of the Central Bank of Armenia Isahak Isahakyan and Minister of Finance Levon Barkhudaryan, who was responsible for making situational decisions, were appointed as co-chairs of the commission. With the commission’s November 19, 1993 decision N15, the national currency - the dram - was put into circulation in the territory of the Republic of Armenia.
On the same day, the President of Armenia Levon Ter-Petrosyan came up with a televised speech in which, he, in particular, said:
“Armenia signed an agreement with a number of republics of the former USSR and Russia in September of this year on creation of a single ruble zone. Our position on this was based both on addressing the current problems and on our long-term social, economic, political and geopolitical goals.
We did our best to tackle the single ruble zone issue through civilized consensus. Due to Russia’s tough stance, the things got out of control. As a result, Russia itself was left out of the ruble zone, followed by Kazakhstan and Uzbekistan, and we too have to make our choice. Such a perspective of the formation of the ruble zone was as unwanted as it was predictable, and that is why we have taken the necessary steps - the national currency - the dram - has been fully printed and transported to the republic.”
The president informed that in order to protect the domestic market from possible currency invasion, each adult citizen would be given an opportunity to directly exchange 50,000 rubles to 250 drams. The 1991-1992 thousand, five thousand and ten thousand ruble banknotes amounting to over 50,000 rubles were to be made deposits in special accounts of savings banks by November 26 inclusive.
On November 24, 1993, Azg daily published “What will happen with the dram: the parliament does not know either” article, presenting the remarks of three deputies of the Supreme Council of Armenia:
Ruben Torosyan, Chairman of the Economic Independence and Economic Development Committee
“For me, the introduction of the national dram was definitely done late. Back in September, the Prime Minister stated that there were no technical problems in this regard. While now, it is done in the conditions of devaluation, when we will face serious difficulties in lowering the prices again. As for the political side of the problem, we, the deputies, are not well-aware of it, because we have received little information about the ongoing negotiations. However, we can conclude from the news published in the press that from both political and economic perspectives, this could have been done very solemnly at least a month ago.”
Mels Sahakyan, Chairman of the Sub-Committee of the Economic Independence and Economic Development Committee
“Probably, it would have been right to start all this in mid-August. I also find it difficult to say what the consequences will be. But I cannot believe that the tenfold increase in prices will reduce to the previous level. I do not think that we will have large food reserves, besides, keeping dram’s image with the Russian rubles and dollars is not an easy task either. The consequence will be a new price hike.”
Tigran Sargsyan, Chairman of the Standing Committee on Finance and Budget Affairs
“What is being implemented is just a necessity. The most efficient option is chosen in terms of mechanisms. As for the dates, it had more a political pre-text: if the national dram was introduced earlier, Armenia would have been accused of violating the agreements on the creation of a new type of ruble zone with all its negative consequences.
As for how well the moment was chosen, that is a question beyond my competence. Although I have never hidden my opinion and have kept on saying since spring about the need of putting the national dram into circulation as soon as possible.”
On November 25, 1993, Noyan Tapan agency published “Tigran Sargsyan: The dram will stabilize” article, which, in particular, said:
“Tigran Sargsyan did not exclude the creation of a new type of ruble zone in the future, expressing an opinion that it will be similar to the single European monetary zone. According to him, the money circulation in the republic will be regulated within several weeks, and the dram will become the only means of payment. Mr. Sargsyan also mentioned that Armenia has not yet been able to get a loan from the International Monetary Fund for the stabilization of its dram. At the same time, receiving similar help from Russia is not excluded.”
In November 2008, during the celebration of the 15th anniversary of the introduction of the dram, Armenian Prime Minister Tigran Sargsyan shared such an episode:
“In 1993, after I announced on TV about putting the national dram into circulation, a girl called me the next day, saying that she is Zaruhi, an astrologist, and asked me to tell her the exact day, hour and minute when the decision to put the national dram into circulation was made. When I asked why she needed that, the girl said that she could predict the fate of the Armenian dram by the stars.
A few days later, she called me and said that the Armenian dram will face difficulties in the first phase: there will be lack of confidence in the country towards the dram, the people will accept it with displeasure, but in the future the dram will stabilize and enjoy the trust of the Armenian people.”
The birth of the names “dram” and “luma”
Former Chairman of the Central Bank of Armenia (1994-1998) Bagrat Asatryan remembers that in 1993 a special discussion was held at the Supreme Council to understand what the name of the national currency would be. Here the names dram and luma were “born”.
“Luma was proposed by Levon Ter-Petrosyan, it had an evangelical origin. As far as I remember, the name dram was also proposed by the president. Then a design competition was announced which was followed by further processes,” Bagrat Asatryan remembers.
The first batch of Armenian drams was printed in Germany. It was transported to Armenia via military aircraft. Bagrat Asatryan says that the print run was not so big to worry about where to store it. A bigger problem was with the Soviet ruble, which had taken up almost all of the bank reserves of the republic.
With Rev. Husik Lazaryan’s Niva to Karabakh
In total, ex-Soviet rubles equivalent to about 117 billion drams were exchanged in Armenia.
“When the currency exchange process started, I was responsible for exchange in Karabakh. The Central Bank did not have transport to take us there. I was given the Niva car of Rev. Husik Lazaryan, the chairman of the Pan-Armenian National Movement’s Administrative Board, I sat at the wheel and together with the CB deputy chairman and other officials we headed to Karabakh. Before our departure, a lot of work had already been done there, thanks to which the exchange process was fully completed, and already on the third day the dram was in circulation in the whole territory of NKR,” Bagrat Asatryan says.
“Organizational works were done well, but we had problems with results. During the soviet years, about 95 billion rubles were put into circulation in Armenia, but over 120 billion rubles were brought for exchange. The reason was the large flow of rubles from other USSR republics to Armenia. In fact, our economy took over more than 20 percent of the sum during that difficult period. This was a serious problem for the country,” the former head of the Central Bank admits.
The first specimen
Bagrat Asatryan remembers that sometimes problems arose with the heirs of the figures whose pictures were depicted on the banknotes.
“For example, we had problems with the family of Viktor Hambardzumyan, who was depicted on the 100 AMD banknote. I talked with Viktor Hambardzumyan’s son. He was saying why the picture of a person with such great merits should be on such a low denomination dram? And I was explaining that it would enjoy greater popularity.
Gevorg Tumanyan, a former employee of the Cash Operations Department at the Central Bank, says that designers Ashot Manukyan and Hrachya Aslanyan worked together on the first specimen of the dram. Years later, following the decision to issue new banknotes, a competition was announced where Ashot Manukyan was recognized the winner.
Gevorg Tumanyan says that after the introduction of drams, a commission came from Moscow several times at the presence of which rubles were destroyed through burning.
“For a long time we were looking for a place to burn them. We tried different factories with large furnaces in Yerevan, but the volume was so large that a decision was made to burn them in the Hrazdan cement factory,” he recalls.
What was the reaction of businessmen to the introduction of the dram? On November 25, 1993, Azg published “The Merchants’ Union Defends the Dram” article which started as follows:
“The presidency of the Armenian Merchants’ Union, having discussed the problems related to money circulation, decided to open the shops on these crucial days for the republic and to strengthen the dram by selling a wide range of products.
Makich Demiryan, the president of the Union, noted that in the conditions of the uncertainty of the fate of the national dram, such a step on the part of the owners should be considered simply brave as the risk of losing all the property is more than real. But realizing that the establishment of Armenian statehood is at stake and thinking only about saving one’s own skin at the moment, no matter how financially justified it is, is a betrayal of national ideals, hence, the presidency of the Union unanimously voted for the proposal to open the shops. Moreover, we are ready to resort to measures of restrain to one degree or another, and have already informed the State Commission on Regulation of Currency Circulation about it,” the article said.
Ara Tadevosyan, Siranush Yeghiazaryan