• ACI Russia

08/14/1998 14:47:53 FOCUS - Yeltsin backs rouble, market storm abates

NOVGOROD, Russia, Aug 14 (Reuters) - President Boris

Yeltsin, blaming Russia's woes partly on global problems, vowed

on Friday not to devalue the rouble and appealed to parliament

to hold a special mid-recess session to approve crisis measures.

Shares rose so sharply after a slump on what was dubbed

"Black Thursday" that trading was suspended. But dealers said

trade was so thin it did not signify a return of confidence in

the government's ability to fend off a financial collapse.

Interrupting his holiday to visit the mediaeval city of

Novgorod, Yeltsin sought to reassure markets and respond to

blunt U.S. calls to put his house in order.

"There will be no devaluation -- that's firm and definite,"

the 67-year-old president told reporters.

"At the moment, there is a new wave of world financial

crisis and we have to brace ourselves again to be able to deal

with this situation," Yeltsin said. "We've calculated our

reserves and are ready to resist this wave."

Yeltsin's Communist opponents said they were ready to agree

to a session of the State Duma lower house, where they are a

dominant force, but made clear they wanted to take the cabinet

to task rather than discuss its legislative initiatives.

After falling 6.5 percent on Thursday, shares shot back up.

The RTS1-Interfax index was 15.2 percent higher at 1320 GMT

after trade was suspended for a 15-minute cooling off period.

Yields on short-term GKO treasury bills also eased somewhat

but remained around 150 percent and the rouble was weak at 6.37

per dollar, below the central bank's floor for the day of 6.31.

Central bank spokeswoman Irina Yasina said central bank

chief Sergei Dubinin and Kremlin debt negotiator Anatoly Chubais

were returning from holiday this weekend but denied there was

any plan to devalue the rouble while markets were closed.

She said it was "normal" that the rouble was technically

quoted below the daily floor and noted it was well above the

bank's absolute floor for the rouble, set at 7.13 to the end of

the year 2000.

However, some foreign exchange booths shut down in central

Moscow, blaming a lack of hard currency, and others would only

sell dollars at rates of up to eight roubles. Some banks refused

to allow depositors to withdraw dollars from savings accounts in

a first, rare sign of currency trouble for ordinary Russians.

Yasina said the central bank, which stepped in on Thursday

to protect the rouble and avert a crisis of confidence in the

banking system, was helping some of the biggest banks by

extending credits to enable them to meet short-term obligations.

Kremlin spokesman Sergei Yastrzhembsky said later Yeltsin

had signed an appeal to the Duma to break into its summer recess

to hold an extraordinary meeting on government draft laws.

Prime Minister Sergei Kiriyenko, who on Friday was visiting

the city of Kazan east of Moscow, has been urging the Duma to

return next week to pass a dozen tax and other bills which

ministers say form a vital part of anti-crisis austerity

measures intended to restore economic stability.

The Duma has yet to decide whether to convene the session.

Communist leader Gennady Zyuganov sounded sceptical about

Yeltsin's appeal but agreed a parliament session was timely now

that the president had "woken up at last".

He demanded that the first item on the agenda should be a

report by Kiriyenko on how he planned to end the crisis.

"We believe such a session could take place before September

1 and will insist on such an agenda," Kiriyenko said.

Yeltsin, looking well after several weeks holiday, said he

had no intention of interrupting his vacation in the Valdai

lakeland to return to Moscow because of the market upsets.

"That would signify that there was turmoil," he said.

He lashed out at his little-seen Economy Minister Yakov

Urinson, accusing him of taking too academic an approach to the

problems of Russian industry. But asked if he still backed

Kiriyenko, Yeltsin said: "Yes, I will keep him on."

Kiriyenko said in Kazan that he was going to discuss a "wide

range of economic problems" with Yeltsin on Monday but did not

specify whether he would do so in person or by telephone.

The United States, alarmed at the prospect of instability in

the world's second nuclear power, told Moscow in unusually blunt

language to restore confidence after shares hit two-year lows.

"It's critical that the Russian government act quickly to

restore confidence in their economy," White House spokesman Mike

McCurry said after Wall Street was hit by Russian jitters.

President Bill Clinton will visit Moscow on September 1-3

for a summit. McCurry said Washington was working on a way to

help but declined to be drawn on whether there might be more

cash for Russia, which won a $22.6 billion bail-out, led by the

International Monetary Fund, last month.

In Tokyo, a senior official told reporters that deputy

finance ministers from the Group of Seven leading industrial

nations had discussed Russia in a telephone conference call.

Investors were shaken by a letter to the Financial Times

newspaper from financier George Soros calling for the rouble to

be devalued and then fixed against the dollar or the euro -- a

plan instantly rejected by the Russian central bank.

Russian newspapers were critical of the government and

sounded a note of panic. "A few more days like that and we will

be witnessing the final collapse of our national currency," the

main business paper, Kommersant-Daily, said of Thursday's drop.


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