This is really a panic....flight to quality is quickly turning into the "movie theater on fire"
Turmoil tightens
grip on Russia
By Andrew McCathie, Moscow
Russia's political crisis enters a critical stage this week as the nation's economy threatens to spin out of control, with inflation suddenly surging and the rouble facing further steep falls.
With prices for basic goods soaring by up to 85 per cent and signs that people are beginning to hoard, the national parliament's lower house, the Duma, is due to consider again today the nomination of Mr Viktor Chernomyrdin as Prime Minister by the President, Mr Boris Yeltsin.
The Duma postponed voting on the matter on Friday as official figures showed inflation racing ahead by 15 per cent last month to its highest rate in more than three years and the currency sliding further on foreign exchange markets.
Concern is growing that Russia could be on the brink of hyperinflation, with fears that whoever emerges as the victor in the power struggle could revert to printing money as a way of paying wages, pensions and outstanding debts.
In a bid to shore up support in the Duma Mr Chernomyrdin appeared on Friday to hold out the prospect of a lurch back towards the Soviet era, threatening to establish "an economic dictatorship" - to deal with companies not meeting their tax commitments - and to force inefficient firms to shut down.
The opposition-dominated Duma has so far refused to accept Mr Chernomyrdin's nomination. As the political horse trading continued over the weekend, there was speculation that a new candidate for the prime ministership might emerge to break the deadlock.
Should the Duma reject the President's candidate three times, Mr Yeltsin could dissolve the parliament and call elections.
But with Russia facing its biggest economic crisis since the collapse of communism eight years ago, the political uncertainty createdby new elections could push the economy closer to the abyss.
The rouble's latest plunge and the surge in inflation is a fresh sign of the growing pressure on the economy, especially as cutting inflation to under 12 per cent and the stability of the rouble had been among the more modest economic achievements of the Yeltsin years. The rouble has lost more than 63 per cent of its value since the crisis began to intensify last month.
The contradictory economic proposals outlined by Mr Chernomyrdin on Friday helped cause the latest plunge. He talked about pumping subsidies into the financial sector to underpin export industries, along with a "controlled emission" - printing money - and the introduction of a currency board arrangement to deal with the rouble.
Setting the rouble in a currency board system follows a similar approach in Argentina, in the 1980s, to dealing with hyperinflation. Last week, Argentina's former finance minister Mr Domingo Cavallo jetted into Moscow, apparently to help Russian officials.
But few analysts appear to believe that the program outlined by Mr Chernomyrdin will see the light of day. Apart from drawing the scorn of the International Monetary Fund, the plan to enforce the collection of company tax is unlikely to be accepted by Mr Chernomyrdin's key supporters in the business elite.
The search continues for other possible candidates for the prime ministership, with Moscow Mayor Mr Yuri Luzhkov and the Speaker of the upper house, Mr Yegor Stroyev, emerging as options.
The IMF board has approved a $US2.2 billion ($3.8 billion) three-year loan to Ukraine as the country, rocked by the crisis in Russia, said it would allow its currency, the hryvnia, to drop as much as 32.5 per cent to 3.5 to the $US by year's end, Bloomberg reports.
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