Vi, how about the theory that this crisis is now an excuse to force the Duma to enact politically unpopular but economically necessary reforms. The IMF, G-7, German banks, US/Clinton can then bailout Russia again while making statements that Russia will have to continue to restructure its markets/economy. This script seems to be playing out right now. See article below:
cbs.marketwatch.com
Premier braces for crisis to get worse
By Margaret Coker, CBS MarketWatch
Last Update: 1:14 PM ET Aug 21, 1998
MOSCOW (CBS.MW) -- Warning the country's financial crisis will get
even more severe, Russia's prime minister urged quick adoption in
pariament Friday of measures to avert a full-blown financial collapse.
Highlighting the day's acrimony, the State Duma responded by seeking the
ouster of Premier Sergei Kiriyenko, President Boris Yeltsin and the rest of
their reformist-minded government.
Market fears spread
The chaos caused the hemorrhaging Russian stock market to fall again,
and the panic in Moscow spilled over into trading on other world markets.
Meanwhile, traders said a flight to quality stemming from Russian unrest
was a major cause in the rise of U.S. Treasury bond prices. See Market
Snapshot and Bond Report.
Deputies broke their summer vacations early to
debate the devaluation of the ruble and renege on
its short-term debt. The extraordinary session,
shown live on Russian television, brought together
the troika of policy makers under heavy fire for
failing to drag the country out of months of
economic crisis -- Kiriyenko, Finance Minister
Mikhail Zadornov and central bank chief Sergei
Dubinin.
Kiriyenko warned lawmakers that there were no
political forces in Russia that could conjure a quick
fix for the economy. "We are only at the start of the
financial crisis," Kiriyenko told members of the
Duma, parliament's lower house. "I told you in
April we were just entering the most difficult phase
of the crisis and that by autumn we would feel the
biggest burden of accumulated state debt and the
most difficult consequences of a fall in world prices
for Russia's main exports."
'Further difficult decisions'
"We will have to take further difficult decisions," Kiriyenko said. "We
cannot be a popular government."
The central bank chief, who has garnered praise from international officials
such as U.S. Treasury Secretary Robert Rubin for his handling of the
Russian financial crisis, defended the devaluation as good for the country.
Devaluation has allowed the central bank to protect foreign currency
reserves, he said. "Our intervention has dropped sharply" and is now
"three times less" than it has been in previous weeks, he said.
The devaluation has provoked howls of protest because it is likely to lead
to higher costs on imported goods and hence inflation, while also severely
hurting the banking sector. "Imported goods are more expensive today
than they were at any point over the past nine months," Dubinin told the
session, adding nonetheless that more expensive foreign products should
spur on consumption of locally produced goods.
'Priorities remain the same'
"Our priorities remain the same: the economic interests of the country, the
economic interests of the citizens of Russia," Dubinin said.
Duma speaker Gennady Seleznyov had to demand silence on the
parliamentary floor as the banker's words met with shouts of protest from
skeptical deputies. Deputies are due next week to vote on a stack of
emergency bills that stalled in earlier hearings.
Russia's financial difficulties have taken on new dimensions since the
government effectively devalued the ruble Monday by allowing its ceiling
to go as high as 9 rubles to the dollar, vs. 6.5 rubles previously. On
Friday, the official exchange rate was 6.99 rubles to the dollar, unchanged
from Thursday.
German bankers met to discuss how to deal with the crisis, which is
sapping the value of the $30 billion on loan to Russia. "The main problem
continues to be Russia," one banker said.
The Duma closed its emergency session with 246 deputies approving a
motion for the government to quit. Under the Russian constitution,
however, the president can simply ignore calls on him to resign even if a
majority passes such a declaration.
During the debate, Yeltsin remained outside of Moscow at his vacation
home, where he has stayed throughout the turmoil since devaluation. After
the Duma resolution passed, presidential spokesman Sergei
Yastrzembsky announced the 67-year-old leader would return to the
capital Monday.
Margaret Coker is Moscow correspondent for CBS MarketWatch.
c 1998 MarketWatch.com, L.L.C. All rights reserved. Disclaimer.
MarketWatch.com is a joint venture of CBS and Data Broadcasting Corporation.
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