Publication: Monitor Volume: 4 Issue: 157

Russian President Boris Yeltsin insists that his government remains in control, despite the recent turmoil on financial markets. Speaking by telephone from his holiday home, Yeltsin told Prime Minister Sergei Kirienko not to take any panic measures and not to devalue the currency. He appealed to the members of the State Duma to convene next week to discuss the government’s stabilization proposals. (BBC, August 14)

Russia’s already volatile markets were thrown into panic following yesterday’s publication of a call by billionaire philanthropist George Soros for a “modest” ruble devaluation of between 15 and 20 percent. Shares on the Moscow stock exchange plunged by 15 percent in early trading yesterday, while interest rates on short-term treasury bills soared to over 210 percent. Trading was halted for the second time in a week as investors worried that a forced devaluation or a major restructuring of domestic debt was around the corner. Markets calmed later in the day, following strong government denials that devaluation was imminent, and the main RTS share index eventually closed 6.5 percent down on the previous day.

Prime Minister Kirienko insisted that there were no grounds for investor panic. He said Russia’s present financial situation is more stable now than it was in July–before Russia reached agreement with the IMF on an international rescue package. Pointing out that Central Bank reserves are larger now than they were in July, Kirienko said this week’s panic had “psychological causes.” Yeltsin’s economic adviser Aleksandr Livshits said the remedies proposed by Soros–introduction of a currency board after devaluation–were inappropriate for Russia’s situation. They would, he said, solve none of Russia’s problems. They would not help the government “collect taxes, balance the budget, carry out essential reforms or pay the wages of federal employees.” (BBC, August 13; Financial Times, August 14)

Soros himself had to rush out a statement yesterday denying that he had any personal interest in a ruble devaluation and saying that he had wanted only to attract foreign attention to Russia’s plight. One Western investor likened Soros’ intervention to “the iceberg complaining about the Titanic.” (BBC, August 13)