• ACI Russia

08/26/1998 08:44:45 FOCUS-Russian central bank voids rouble/dlr trade

(Releads with rouble fall, markets, adds details)

By Adam Tanner

MOSCOW, Aug 26 (Reuters) - Russia's central bank voided

morning trade in the rouble on Wednesday to bar further plunges

in the currency as acting Prime Minister Viktor Chernomyrdin

said he was deeply unhappy with the bank's performance.

Central bank officials appeared paralysed by the chaos on

Russian financial markets, and in desperation they announced

that morning rouble trade was invalid.

Trading was suspended on the Moscow Interbank Currency

Exchange (MICEX) soon after it started because of a five-percent

drop from Tuesday's fix against the U.S. currency. The trade --

coming after a 10 percent decline on Tuesday -- was then

declared null and void.

The Reuters index of leading shares was down 9.5 percent at

0800 GMT on very low trade volumes.

"Financial and economic policy is a question to which I am

giving my attention minute-by-minute," Itar-Tass quoted

Chernomyrdin as saying. "I am extremely dissatisfied with the

work of the central bank over the last two days."

The report said he would talk to the bank's chief, Sergei

Dubinin later on Wednesday.

President Boris Yeltsin summoned Chernomyrdin back from the

political wilderness on Sunday and fired the four-month old

cabinet of reformer Sergei Kiriyenko, 36, saying Russia needed a

"heavyweight" at the helm.

It was not clear if Chernomyrdin was hinting at changes in

the central bank -- where Dubinin has been in charge since

October 1995 -- or just playing to populist sentiment unhappy

about last week's devaluation of the rouble.

The rouble fell to 8.26 roubles per dollar by 0700 GMT and

MICEX quickly suspended trade. It is already a third lower since

it was devalued from about 6.2 to the dollar ten days ago.

On Tuesday, the rouble tumbled to 7.88 from 7.14 to the

dollar -- the worst fall in a single day since plunging on what

became known as Black Tuesday in October 1994.

With the rouble spiralling lower and ordinary Russians

alarmed about price rises, Chernomyrdin said any delay in his

confirmation by parliament would exacerbate the situation and he

warned of tough economic decisions ahead.

But for all his experience Chernomyrdin, who served Yeltsin

loyally as prime minister for five years until his abrupt

sacking in March, faces a daunting task in winning parliamentary

support and halting Russia's precipitous financial decline.

"Objectively it could turn out that the authorities will

have to take very tough measures for a resolution in the

financial-economic sector," Chernomyrdin was quoted by Russian

news agencies as saying on Tuesday evening.

Yeltsin, who is under fire for the devaluation and sudden

change in the government, was nowhere to be found on Wednesday,

and calls to his receptionist went unanswered.

"We don't know what he is doing," a spokesman said. "We have

no official information."

The central bank for its part has weakened ability to

support the rouble as its reserves have fallen sharply in recent

weeks. Its foreign exchange and gold reserves fell to $15.1

billion on August 14 from $17.0 billion on August 7.

Retailers of everything from pizza to hi-tech electronics

scrambled to raise prices and people rushed to banks to try to

get at their money.

"People are also withdrawing en masse their rouble and

dollar savings from banks," said a cashier in the

Omskpromstroibank in the Siberian city of Omsk.

Late on Tuesday, the government announced some details of a

plan to restructure $40 billion worth of domestic debt into

longer-term paper, but besieged officials were still unable to

provide further information on the plan on Wednesday.

Western analysts are calling the scheme an effective default

which will hit investor confidence in Russia for years to come.

As part of his drive for broader political support

Chernomyrdin was expected on Wednesday to hold talks with

Alexander Lebed, the ambitious governor of Siberia's Krasnoyarsk

region and a likely future rival for the presidency.

The Communist-dominated lower house of parliament, the State

Duma, wants him to reverse Kiriyenko's reformist course and

bring opposition parties into his cabinet.

"The government will have to be formed on a coalition basis,

if they want to rescue the country from its crisis together,"

said Gennady Seleznyov, the Duma's communist speaker.

Chernomyrdin has agreed to jointly draw up documents with

parliament outlining an economic policy and a political deal

which Seleznyov said would mean Yeltsin giving up some power.

Yeltsin, whose erratic behaviour and lapses of concentration

have sparked fierce criticism, could have less influence over

the new government, which will be shorn of key liberals like

former deputy prime minister Boris Nemtsov.

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