Russia to Clinton: Bring Your Wallet
When President Clinton arrives in Moscow for a summit with Russian President Boris Yeltsin next week, Russia will still be in a financial crisis after its devaluation of the ruble last week.
Russian expert David Kramer calls the visit "utterly foolish." "It is a particularly awkward moment to be in Russia," he says. "Mr. Clinton might be better off canceling."
The decision to go was announced last month, about the time the International Monetary Fund (IMF) reached a deal with the Russians on an extra $11.2 billion loan aimed at preventing devaluation.
The White House made the summit call. It was not pushed by the State Department.
The suspicion is that Clinton hopes to repeat the diplomatic success of his trip to China that began June 25.
That trip also diverted attention, if briefly, from the Monica Lewinsky affair.
But the mood may be bad in Moscow when Clinton arrives. The Group of Seven industrial nations decided not to provide more funds when a run on the ruble got going about 10 days ago. They want more Russian reform first. The IMF has only $10 billion of loan money left.
Russians may hope Clinton will come bearing financial gifts. But that's not likely.
"Congress would string him up if he tried to do that," says Mr. Kramer, an economist with the Carnegie Endowment for International Peace in Washington.
Many Republicans in Congress regard more money for Russia as a waste.
"It is a Russian problem," Kramer says.
Other experts agree.
"The Russians are a victim of their own doing," says Marshall Goldman, an economist at Wellesley College, Wellesley, Mass.
Many Russian businessmen, he charges, are "robber barons." They feel free to steal from the state, buying state properties at prices far below their value. They have an "ambivalent attitude" toward foreign investment, often mistreating foreign minority owners of a company.
Yet Clinton may face allegations by the Communist opposition in Russia that the West is trying to weaken their nation by refusing further help.
The immediate cause of the problem was a loss of confidence by investors and the West in Russia's efforts for economic reform. The financial crisis in Asia compounded these fears. Investors began to move buckets of money out of the ruble. The government was faced with a critical short-term funding crisis.
Russia's central bank chief Sergei Dubinin said last Wednesday the bank had spent $3.5 billion to $3.8 billion to support the ruble since July 20.
The ruble support was in vain.
Last Monday the Yeltsin government widened the bands for trading the ruble on the official foreign exchange market, in effect a devaluation.
And it imposed a 90-day moratorium on some foreign-debt servicing and a restructuring of billions in government treasury bills, one-third of these owned by foreigners attracted by fancy interest rates.
The government's actions are complex and not yet entirely clear.
The ruble by last Wednesday had fallen to 6.99 for $1. The government said it would not intervene until the rate reached 9.5 rubles per $1.
Deputy Prime Minister Boris Fyodorov said details of the plan for restructuring short-term government debt would be announced today.
Many foreign investors are trying to figure out if they are caught by the moratorium or not. The government has proposed that Russian banks meet with their Western creditors to work out repayment schedules.
"I don't see Western investors being enticed to return there for a while," says Matthew Sherwood, an economist with a Washington consulting firm.
Russia faces more inflation, a domestic banking crisis, and a recession that could last two years, Mr. Sherwood predicts.
That has political significance. Russia's lower house of parliament, faces an election at the end of 1999 and the presidency is up for grabs in 2000.
Sherwood sees some stability as essential in Russia for economic reforms to continue. Ironically, the present government is the most reformist ever, he figures. That stability is now at risk - and so are reforms.
signs of trouble:
An employee from the Moscow currency exchange switches rates on a sidewalk sign. last Monday.
Russia devalued the ruble after weeks of financial turmoil., so a dollar now buys almost twice as many rubles.