RUBLE UP AND RUSSIAN WORRIES ARE TOO.

The ruble has stabilized or even risenagainst major Western currencies over the last two weeks, but Russian bankingofficials warned that new inflationary pressures will make it extremelydifficult for Moscow to maintain this record, Segodnya reported May 12. Lastweek, however, there was some good news: wholesale prices fell 1.1% for thefirst time in several years, Kommersant (no. 17) reported. The battle againstinflation recently has enlisted some new recruits: Russia’s largest banks whono longer benefit from inflation, Kommersant-daily said on May 7. But thebusiness paper said that some banks still benefit from rapid inflation: thosewhich service state-run enterprises that have not received their money fromthe state. This conflict could break into the open later this year when thegovernment is expected to turn to the banks to finance the budget deficit,one of the non-inflationary means that finance minister Vladimir Panskov hasidentified, Segodnya said on May 13. But budget deficits are not the onlyforce driving inflation. Economist Oleg Bogomolov warned in Nezavisimayagazeta May 11 that corruption and rising imports in the consumer sector arealso to blame. He criticized Russian officials and businessmen who now dependon an 800,000-man army of body guards, and called for protectionist measuresto shield development of the internal production of consumer goods.

Investment Picture Improves.