Russian Currency Crisis Deepens As Ruble, Stocks, and Bonds FallBy Sharon LaFraniere
The Washington Post
Russia's financial crisis escalated sharply Wednesday as the government's attempts to defend the embattled ruble collapsed, prompting a steep fall in stock and bond markets, a run on banks by anxious depositors and a new wave of political attacks on President Boris Yeltsin.
The Russian Central Bank was forced to suspend trading of rubles for dollars after concluding it could no longer afford to pour the country's shrinking reserves of dollars into the currency markets. The action came after the ruble fell 5 percent in one morning, to 8.26 to the dollar, on the Moscow Interbank Currency Exchange. By the end of the day, the ruble had fallen 40 percent against the German mark, prompting a selloff in stock markets around Europe.
Average Russians, who until now have seen limited effects of the mounting troubles in Russian financial markets, Wednesday flocked to their banks to withdraw rubles and lined up at currency exchange offices in a desperate effort to buy dollars. Many were frustrated: banks turned away most depositors, allowing them only to sign lists for future withdrawals. Many retailers began raising prices, anticipating what economists fear may be an explosion of inflation. On the street, currency exchange shops and traders ran out of dollars early in the day after demanding 9 and even 10 rubles to the dollar.
"The ruble is crashing," said Al Breach, an economist with the Russian European Center for Economic Policy. "Disaster is the only word for it. Today is the day it was announced to the world."
Yeltsin and his newly-named prime minister, Victor Cher-nomyrdin, appeared nearly helpless in the face of the latest currency meltdown. Chernomydrin, who was dismissed as prime minister last March and reappointed Sunday, rushed to Ukraine to hold an emergency meeting with International Monetary Fund director Michel Camdessus. He was expected to ask that the IMF deliver the next installment of a multibillion dollar loan to Russia - despite its failures to implement policy reforms - so that the government can try to stave off a larger economic collapse.
Meanwhile, Yeltsin faced mounting calls for his resignation from Communists and other opponents in the Russian Duma, the lower house of parliament, and almost universal condemnation from local economists and commentators. Though the 67-year-old president is likely to ignore the demands that he quit, the new crisis could complicate his efforts to win confirmation in the Duma of the appointment of Cheronmyrdin and of a yet-to-be-named cabinet.
Anatoly Chubais, Yeltsin's envoy to international lending institutions, described the government Wednesday as "suspended" while it awaits Chernomyrdin's confirmation and a new cabinet. For his part, Chernomyrdin said little publicly other than that he intends to have "a serious talk" with the head of the Central Bank.
In Washington, where preparations continue for a summit between President Clinton and Yeltsin in Moscow early next week, officials said they are reluctant to consider additional Western support for Russia until the Chernomyrdin team offers a detailed account of its policy plans. "There are no shortcuts in restoring market confidence, and the next steps are up to the Russians," deputy White House spokesman Barry Toiv told reporters in Martha's Vineyard.