Russia returns to its normal worries Economic crisis fades, but some ask how long forbearance can last


MOSCOW -- With the ruble strengthening and stock prices rising yesterday, the latest Russian economic crisis began to subside. Ordinary citizens returned to what they do best -- persevering and hoping for the best.

Some, however, were wondering how long that forbearance could last.

"The economic situation is very critical," said Ludmilla Telen, deputy editor of Moscow News. "And what is the government doing? They're calling out the firemen and putting out another fire. [Prime Minister Sergei] Kiriyenko is doing it well. He's organized and decisive. But he's only putting out a fire."

The latest blaze flared up Wednesday as panic selling forced the stock market down and pressure mounted on the ruble. The central bank tripled the interest rate it charges on loans to banks, from 50 percent to 150 percent, to help protect the ruble because collapse would have been disastrous for a country living on imports. "I want to hope as always, but honestly speaking, I'm worried," said Svetlana Osina, an unemployed economist who stopped to talk on a downtown street yesterday. "In principle, the economy is a constant problem, and I worry that the longer it goes on the worse the consequences will be."

While Osina worried about the possibility of rising prices, newspapers and television broadcasts were raising alarm about the stock market, which had fallen to 50 percent of its earlier value by Wednesday. Oleg Vyugin, deputy finance minister, tried to explain yesterday what had happened.

"It can be described in one word, 'panic,' " he said at a news conference. "This panic was provoked by the fact that the professional market players had been informed or had come to the conclusion that the securities they held could fall even further and that they should get rid of them."

Though the stock market here is frequently cited as an economic barometer, few Russians actually have a stake in it.

"The stock market is a great thing," said Bruce W. Bean, chairman of the American Chamber of Commerce of Russia, "but it's totally unrelated to anything. Do you know any Russians who own stock? It's totally unrelated to average Russians -- and rich Russians. It's a media event."

The real economy is not the capital market, he said, so the effect of plunging stock prices in Moscow is limited. "It means a couple of the brokers won't be able to put gas in their Blazers or Jeeps," he said.

The crisis more likely is because of an attack on the ruble by currency traders, Bean said. "It comes from computer terminals which are not located in Moscow."

Vyugin, the deputy finance minister, said Russia was bedeviled by a number of negative factors at one time -- including speculation.

The Asian financial crisis has made investors more cautious, Russia has been sapped by low world oil prices, and internal politics have taken their toll, he said. President Boris N. Yeltsin's dismissal of his prime minister and the time it took for Kiriyenko's confirmation meant the government worked very slowly for a month.

And, he said, the State Duma shook investor confidence by passing a law limiting foreign shares in the giant UES electric company to 25 percent -- even though foreign investment was already close to 30 percent. How that contradiction will be sorted out has not yet been resolved.

That's the kind of thing that scares off foreigners and threatens what Russia needs most from them, Bean says.

"What's important about investors is the jobs they bring," he says. "McDonald's has trained around 13,000 to 14,000 people to smile. And that's why you still have Russians lined up outside on a rainy weekend, waiting to get in. They've created a comfortable place. That's real. That's meaningful for Russia in the long run."

Investors also say Yeltsin cannot achieve stability unless he can push a tax code through the Duma. The country's troubles have been aggravated by low tax collections blamed on an arbitrary and avaricious tax system.

The tax laws are held in such contempt that well-known public figures have no compunction about saying openly that they don't pay what they should. Yesterday, Yeltsin promised to go after such celebrities and threatened that heads would roll in the tax collection department. He planned to sign a decree today allowing authorities to seize tax debtors' property.

And some officials were still hoping that the International Monetary Fund would step in with a loan to bolster Russia's financial reserves.

"It would play a big positive role and quickly normalize the situation," Vyugin said.

The financial crisis will be a long time in the resolution, most experts said, but at least the panic was dying down.

Vladimir Gusinsky, a billionaire banker and media magnate, looked positively calm by yesterday afternoon. He declined to admit any uneasiness. Had he slept last night?

"Very badly," he said, then smiled. "But maybe because I had an argument with my wife."

Pub Date: 5/29/98

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