IN THE WILDERNESS WITHOUT A MAP…. A
Western financial analyst told a group of Russian bankers last week that recovery is still “years away.” The Russian economy, said Thomson BankWatch president Ramin Habibi, is “increasingly demonetized.” With rubles losing value, dollars scarce and the banking system discredited, barter is replacing money and credit. The Russian Federation, he said, is in danger of disintegration.
The government still has no plan to confront the crisis, and its efforts to date do not inspire confidence. The 37-page “anticrisis program” released November 15 calls for creating emergency stockpiles of fuel, food and other essentials and reducing tariffs on imports of these items–though Russian negotiators initially insisted on imposing duties on US$850 million of American food aid to be shipped in the coming months. The program also calls for merging “problem” companies into larger corporations, with the state providing infusions of capital and taking equity in exchange, but it does not say how much money, if any, is available for this purpose. The program includes the ritualistic promise of payment of wage and pension arrears, but the government does not have the 35 billion rubles (around US$2 billion at current rates) it owes. The deputy prime minister in charge of social policy says the “deadline” for clearing the arrears, which just weeks ago had been set at December 31, will have to be pushed off to July 1, 1999.
Some foreigners are ready to take what pittance they can get. A creditors’ committee led by Deutsche Bank is reportedly close to agreement on terms for resumption of payments on about US$10 billion in hard-currency obligations that went into default last August 17. The deal would allow Russia to redeem its obligations in rubles: 10 percent in cash, 70 percent in interest-bearing securities, and 20 percent in non-interest-bearing securities which can be swapped for equity in troubled banks or used to reduce tax liabilities. Still unresolved is when the rubles can eventually be converted into hard currency, and at what rate.
The foreigners who bought forward rubles in the months before the crash are not so lucky. According to press reports, Russian banks owe 264 billion rubles (about US$15 billion) on forward contracts which have fallen due and cannot be covered. Inkombank, which recently declared bankruptcy, is responsible for 122 billion rubles, almost half the total.
— Moscow Mayor Yuri Luzhkov formally launched Otechestvo (Fatherland), a new political movement which, in his words, “will aspire to power.” Some analysts believe Luzhkov’s supporters could win 25 percent of the seats in next year’s parliamentary elections. — Old-time religion: Local prosecutors in Moscow have brought a civil suit to ban Jehovah’s Witnesses from the city. They accuse the sect of destroying families, fostering hatred and driving its members to insanity and suicide. The suit is the first brought under a federal statute enacted last year that severely restricts the activities of religious organizations not registered under the old Soviet Union. — Cheap oil: The fall in oil prices has cut deeply into Russia’s export earnings. Official statistics show that in the first three quarters of 1998, oil-export volumes rose 7.5 percent over the same period a year ago, while oil-export revenues fell 27 percent, from US$11 billion to US$8.1 billion. — Family ties: The break-up of the Soviet Union left some 25 million Russians inside the borders of newly independent states, an instant Diaspora of enormous proportions. The Russian Duma last week passed a bill on “Policy Regarding Compatriots Abroad” which defines a “compatriot” as a former Soviet citizen who speaks Russian, regardless of his ethnic group. The bill makes adoption of Russian as an official language in the states of the former USSR a goal of Russia’s foreign policy and states that the Russian Federation will evacuate or provide aid to compatriots abroad who are in distress. The latter clause could provide a justification for future Russian military adventures.