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RUBLE IN RUIN?
Can the Russian Government Survive the Latest Crisis? June 9, 1998 |
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NewsHour Backgrounders May 28, 1998: The NewsHour examines the troubled ruble. May 27, 1998: Daniel Williams discusses the internal and external challenges facing Russia. April 24, 1998: Yeltsin's choice for prime minister, Sergei Kiriyenko, is approved by the Russian Duma. March 23, 1998: Full coverage of Yeltsin's dismissal of his cabinet. December 5, 1997: An Online NewsHour forum on the last shake-up in the Kremlin. July 22, 1997: Elizabeth Farnsworth speaks with David Hoffman, The Washington Post's Moscow Correspondent. May 27, 1997: Russia agrees to the expansion of NATO. Browse the NewsHour's coverage of Europe and Russia. Outside Links The Russian Foreign Ministry Russian Embassy in Washington, D.C. |
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Panicked selling on the Russian stock market and an unstable ruble has left the President Yeltsin's hand-picked prime minister, Sergei Kiriyenko, facing one of Russia's most serious financial crises since the collapse of the Soviet Union.
Skittish foreign investors, the continuing economic problems in Asia and shaky public finances have forced the central bank to quintuple interest rates in the past two weeks -- from 30 to 150 percent -- in an effort to stabilize the ruble. The moves have been welcomed by some, but many analysts worry the higher rates may deepen the panic.
"The intrigues, which so fascinate the West and so fascinate reporters like me -- why did Yeltsin do this, was he sick, was he drunk, why did he hire this guy out of the blue -- that doesn't interest [the Russian people] as much. What interests them is will this man be able to deliver the mail. Will he be able to pay wages to people whose wages are always behind," Washington Post reporter Daniel Williams explained in a recent NewsHour interview. "They would like government to work, and if Mr. Kiriyenko can perform that, I think people will welcome him. But I don't think there's great confidence that he'll be able to deliver."
Will the financial turmoil turn the situation in Russia into the next Indonesia? Will Yeltsin maintain control? Can the new government survive this crisis? Dan Williams answered your questions about the brewing financial troubles as well as the political and social situation in Russia.
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John Ewing of Alexandria, VA asks:
What has happened to the former mayor? I know he was appointed to the cabinet, but what has he been doing? Is he in enough of a position of power to contest Lebed for the premiership when Yeltsin steps down?
Daniel Williams responds:
I presume the questioner is asking about Boris Nemtsov, who has had his ups and downs since coming to Moscow as a deputy prime minister over a year ago. He is regarded as a leading economic reformer and battled without notable success the big business people in government. A potential successor to Yeltsin, but he would have to win backing from media and financial magnates.
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Alisa Salley of Austin, TX asks:
If the proposed IMF loan to Russia goes through, how much will it really help Russia? Given that the Russian government cannot perform the basic functions of a government (Paying pensions, paying workers on time, and so on), will this IMF loan really only be a short term solution? If so, what are some possibilities for longer term solutions?
Daniel Williams responds:
The problem with an IMF bailout for Russia is that needed reforms – particularly in tax collection – have long been promised but never fulfilled. Some Russian commentators fear that more loan money will just disappear down a black hole of waste. In any case, it would help keep the ruble stable and inflation low – for now.
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Aaron Gaudio of Corvallis, OR asks:
All we seem to hear about in the news is either the rich "new" Russians, the poor Russians, or the disparity between the two. How about a middle class? Is there one in Russia, and how does that factor into the Russian economy?
Daniel Williams responds:
There is a middle class and it is growing, particularly in Moscow. They buy cars and fix up their apartments and depend on a stable economy to make their businesses grow. But interest rates make it hard for small businesses to raise capital and the threat of inflation is always a worry – it could wipe out savings in a flash.
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John P. Gallagher of San Francisco, CA asks:
I wonder what efforts are being made in the West to try and capitalize on the situation in Russia? In your opinion, would Western involvement help or hurt the Russian economy at this critical stage?
Daniel Williams responds:
One problem the West faces in helping out Russia financially is when foreigners set conditions in the form of rules for Russia to follow, they get blamed for any hardship or failures that might result. In any case, the risk for not helping is the return of inflation to Russia and possible social unrest. On the other hand, without better tax collection and efficient government, this kind of crisis will reoccur.
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Michael Wahl of Houston, TX asks:
Now that the economy is not functioning properly in Russia, will the communist party be helped by the economic problems? If the communist party is helped by the economic crises, what gains will the communist party achieve?
Daniel Williams responds:
The Communist party, as the leading opposition voice, is busily saying "Told you so" as Russia's woes mount up. Just how much they stand to gain politically from the crisis is another matter – the party has not offered a clear alternative other than a return to the past, and most Russian's seem to reject that.
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Alan Plotnck of Hamden, CT asks:
If Russia goes the path of Indonesia, what dangers does it present to the American economy from the standpoint of our financial markets and our international trade? Some years ago we sent some of our brightest economists to Russia to help them get a fresh start. What ever happened to that trip?
Daniel Williams responds:
American trade will probably not suffer much from the Russian crisis. Russia is not one of our biggest customers. Russian gas and oil exports go largely to Europe and those supplies would probably keep flowing. The general fear in the West is that a collapsing economy could lead to instability, and perhaps the replacement of the relatively friendly and democratic Yeltsin government by some harder line group. Put another way, if Russia didn't have nukes, its crisis would not raise so much concern.
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