Publication: Monitor Volume: 4 Issue: 195

The State Duma, the lower house of Russia’s parliament, passed several pieces of legislation Wednesday (October 21) which were far more radical–in terms of deficit spending and state interventions in the economy–than the government of Prime Minister Yevgeny Primakov was apparently contemplating. One bill would require the state to guarantee all funds, both rubles and foreign currency, held in Russian bank accounts as of September 1, 1998. The full amount held on that date, along with the interest promised on that date, will be guaranteed by the state, along with wage and social payments transferred into those accounts after September 1.

After the government devalued the ruble and declared a moratorium and domestic debt payments last August, many of Russia’s largest commercial banks, finding themselves in critical condition, suspended payments to deposit holders. The government subsequently gave customers the option of transferring their funds from commercial banks to Sberbank, the state’s savings bank. Ruble savings transferred to Sberbank, however, will not be available until December. Furthermore, no interest will be paid on such accounts. Hard currency savings will also become available only in December, and will be paid out at a very low exchange rate. According to the Duma’s plan, money in commercial banks would also be transferred to Sberbank. Those with ruble accounts would be guaranteed all interest earned, while hard-currency account holders could receive their funds at the official exchange rate on the day the law is published (Russian agencies, October 21).

The bill must now be approved by the Federation Council, the parliament’s upper chamber. Even if that happens, President Boris Yeltsin is likely to veto the legislation.

The Duma passed a second measure, ostensibly directed against money laundering. It would require that any operations with money or other property worth more than 2000 minimum wages (166,980 rubles, or roughly US$9,800 at current exchange rates), if carried out by an individual, or worth 20,000 minimum wages (1,669,800 rubles, or roughly US$98,000), if carried out by a corporation, be reported to a host of state bodies. Those persons or companies found to be laundering illegally obtained money would be criminally prosecuted. Central Bank chief Viktor Gerashchenko came out against the proposal, which was the brainchild of Viktor Ilyukhin, head of the Duma’s security committee and a member of the Communist Party’s radical wing (Kommersant daily, October 22).