Publication: Prism Volume: 1 Issue: 18

Banking Crisis Likely to Continue as Election Campaign Picks Up Steam

In Russia, the week is likely to see the continuation and perhapsan exacerbation of the banking crisis, and the crystallizationof party groupings, platforms, and candidates’ slates in the Dumaelections.

The government does not seem to have developed a concept fordealing with the interbank liquidity crisis other than throughpolitically-motivated rescues of friendly firms. Leading officials,from the president on down, and including reformist ministers,have hinted that bailouts through liquidity infusions to individualbanks are available, but only in exchange for contributions tovarious government causes or to governmental parties in the upcomingcampaign.

The electoral campaign, as it gathers steam, is likely to beginsupplying the first reliable indicators in a long time about therelative popularity of Russia’s political parties, and about thepublic’s ideological inclinations. One issue in particular holdsfar-reaching political ramifications. The moment seems imminentwhen the government will have to admit to the failure of the 1995crop, explain it to the public, and recognize its fiscal consequences.Recent crop forecasts presage the need for massive food imports.Meanwhile, the unresolved situation in Chechnya will continueto divert political attention and funds from the more importantissues.

Ukraine looks set next week to begin preparing negotiations amongthe belligerents in ex-Yugoslavia, with a view to an early, Kiev-mediatedpeace conference for the region. Ukraine’s apparent success insponsoring this event, should it materialize, will do much toeclipse Russia’s standing in both the Balkans and in East-CentralEurope. In Ukraine’s neighbor Moldova, the week is likely to witnessa continuing escalation of the tensions between the presidenton the one hand, and the government and parliamentary majority,on the other hand.

Also look for:

A flurry of meetings in Baku, Tbilisi, Moscow, Ankara, and Londonin the endgame of the negotiations over pipeline routes for earlyAzeri oil;

A possibly open break between the Abkhaz and their former protectorMoscow;

Preliminary maneuvering leading to the fifth round of inter-Tajiknegotiations;

And the investigation into the assassination attempt againstShevardnadze, which at least some Georgian security officialsmay want to turn into a settling of accounts with the whole "irreconcilable"political-paramilitary-mafia opposition.