West plotted to topple Gorbachev by dumping rubles, premier charges

MOSCOW — MOSCOW -- Telling a tale more outlandish than the wildest spy fiction, Soviet Prime Minister Valentin S. Pavlov said yesterday that his government had foiled a Western plot to topple the leadership of President Mikhail S. Gorbachev by dumping billions of paper rubles in the country and setting off hyperinflation.

"We were threatened with the loss of economic independence, a kind of quiet, bloodless annexation," Mr. Pavlov told the labor union newspaper Trud.


"I can assure you that it was a question not of days, but of hours," he said in a lengthy interview that offered plenty of drama but relatively few details.

Mr. Pavlov charged that Western banks, working with some Soviet banks, had accumulated enormous quantities of rubles and were preparing to release all of the currency into the Soviet economy, timing the release to coincide with the Persian Gulf war.


He suggested that the plotters included nationalist leaders in the Soviet republics who wanted the ruble to collapse in order to bring down the Soviet leadership and permit the issue of new republican currencies.

"Such actions have been taken in many regions of the world where there was a desire to change the political system, to dump inconvenient political figures," he said. "President Gorbachev simply was getting in somebody's way."

He said what saved the Soviet Union from economic slavery was the decision Jan. 22 to withdraw 50- and 100-ruble bank notes from circulation, which presumably left the plotters holding worthless paper.

Mr. Pavlov, 53, a pudgy-faced, crew-cut economist and former finance minister, has faced fierce criticism for the partial currency reform, which was announced on his eighth day in office. The critics include pensioners who spent hours shivering in endless lines to exchange their savings as well as experts who have doubted the efficacy of the move.

Hence, skeptics are likely to interpret Mr. Pavlov's allegations of the plot against the ruble as an attempt to deflect public anger onto imaginary Western enemies in league with Soviet radicals. Such a tactic has a long record in Russian and Soviet history, and certainly the prime minister raised at least as many questions as he answered -- pleading military secrecy.

"About this and about much else, I have no right to speak," he said in answer to one of Trud's questions, "since the financial war we have declared is still going on. And war is war. You can't reveal to your opponent all that you know about him."

Nonetheless, Mr. Pavlov gave enough facts to tantalize readers and hinted that more would be unveiled in the future.

"It is known that there has long been planned a major dumping of money in the country," he said. "This is being done by various means, including the buying up of 100- and 50-ruble bank notes. Banking organizations in our country have become involved, as well as a number of private banks in Austria, Switzerland and Canada. I won't name the banks, though I know their concrete addresses."


He also said he knew of "attempts at the resale of billions in Soviet money through West Germany to Switzerland, through Hungary to Luxembourg, the Netherlands and so on."

He asserted that the release of billions of rubles into the ailing Soviet economy would be a "financial catastrophe."

The prime minister's charges seem to accord with an alleged currency scandal aired by the KGB lately in an evident attempt to smear Gennady Filshin, a deputy prime minister of the Russian Federation and aide to Mr. Gorbachev's chief rival, Russian leader Boris N. Yeltsin.

In that scheme, the KGB claims that a British firm was arranging to buy 140 billion rubles -- more than all the cash in circulation in the Soviet Union -- for $7 billion. Mr. Filshin wrote a letter of support for the deal, but he said the version presented to him involved the import of billions of dollars' worth of consumer goods rather than grand-scale currency speculation.

A number of circumstances raise serious questions about Mr. Pavlov's plot allegation.

For instance, when the money exchange was announced, Mr. Pavlov himself said there were only 7 billion rubles in large bank notes abroad. With 361 billion rubles in savings accounts in the Soviet Union and 111 billion in cash in circulation, it appears questionable whether just 7 billion could touch off the financial conflagration he warns of.


In addition, Mr. Pavlov does not name or describe what forces in the West were behind the alleged plot. No Western government publicly or privately now advocates the breakup of the Soviet Union, and many Western leaders still seem to trust Mr. Gorbachev more than his rivals.

Another question being asked is who would spend dollars, a stable currency, to buy rubles, a virtually worthless currency. Given the state of the Soviet economy, and the likelihood of imminent currency reform, why would Westerners risk their assets by investing in rubles?

Canadian bankers quickly denied the allegations. Bryan Griffiths, senior vice president of foreign exchange at the Royal Bank of Canada, the country's largest bank, told Reuters in Toronto, "Even if someone wanted to do this, it's a ridiculous premise. I don't think it's possible."

Canada has six major national banks, none of which is involved in ruble transactions in any significant volume. Mr. Griffiths said ruble trading throughout North America was minimal. "I'd be surprised if anyone was doing more than a few thousand dollars a week or month."