08/26/1998 11:16:57 FOCUS-Rouble melts down, citizens withdraw savings
(Updates rouble, markets, Yeltsin)
By Adam Tanner
MOSCOW, Aug 26 (Reuters) - Russia's rouble lost more than
two thirds of its value against the German mark on Moscow's main
currency exchange on Wednesday after the central bank voided
dollar trades and said they would not set a dollar rate for the
There was a growing sense of panic among Russian people, who
rushed to banks to withdraw their savings, while some stores
closed down to mark up prices.
"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.
The deepening crisis led to declines in European shares.
Frankfurt was hardest hit among major European bourses, with the
Xetra-DAX declining 2.9 percent in a reflection of German banks'
large exposure to Russian debt. Deutsche Bank AG <DBKG.F> shares
dropped more than six percent to almost a six-month low.
Russian central bank officials appeared paralysed by the
chaos on the nation's financial markets, and in desperation
voided all morning rouble trade against the dollar.
They later said they would not set an official rouble-dollar
rate, called the daily fix, for Wednesday, the first such
frantic run for cover in recent years.
The rouble continued its meltdown in German mark trade on the
Moscow Interbank Currency Exchange (MICEX), and was fixed down
69 percent to 7.6 marks per dollar from 4.4995 the previous day.
About half the stores in GUM, the country's leading
department store off Red Square, shut their doors to increase
prices. Eldery people people wandered the streets with their
final roubles seeking, often without success, anywhere or anyone
to trade their savings into dollars.
"Financial and economic policy is a question to which I am
giving my attention minute-by-minute," Itar-Tass quoted acting
Prime Minister Viktor Chernomyrdin as saying. "I am extremely
dissatisfied with the work of the central bank over the last two
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.
Like a man invited to stand on quick sand, Chernomyrdin has
been unable to stop the rouble's plunge.
The central bank for its part has less 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.
The Federal Securities Commission chairman Dimitry
Vassiliyev later seconded Chernomyrdin's criticism of the
central bank which Dubinin has led since October 1995.
"Serious mistakes were allowed by the leadership at the
highest levels including over the past two years -- the actions
of the central bank and its leadership," he told reporters.
The RTS index of leading shares was down 8.4 percent at 1000
GMT on very low trade volumes.
Trading was suspended on MICEX soon after it started because
of an immediate five-percent drop to 8.26 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.
At the suspended rate -- already outdated because of the
rouble fall against the German mark -- 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
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.
"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 only have information that the president is working, but
we are not saying where he is working. We don't know," said
spokeswoman Darya Plokhova. "So far, he has no meetings planned
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.
Also on Wednesday, Russian Communist leader Gennady Zyuganov
demanded that Chenromyrdin abandon the tough monetary course
which he said was dictated by the West.
"We will only support a policy and a leadership that would
clearly and straightforwardly reject the so-called monetarist
reforms and agree to take a different course," Zyuganov, whose
party is dominant in the parliament, told a news conference.