By Pete Kotz
By Michael Musto
By Michael Musto
By Capt. James Van Thach told to Jonathan Wei
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By Nick Pinto
By Steve Weinstein
MoscowThe ruble is falling. Russia is defaulting on its foreign debts. Banks are collapsing. In a country where 50 percent of all food is imported, imports are grinding to a halt. Countless jobs are at risk. And tens of millions of Russians may lose their savings for the third time since the 1991 collapse of Communism. Meanwhile, the fallout is shaking world markets. When Russian president Boris Yeltsin surfaces, he looks old, confused, incompetent, and embarrassed.
On Monday, after a four-hour meeting, the Communist-dominated Russian parliament refused to confirm Yeltsin's choice for prime minister, Viktor Chernomyrdinthe same man Yeltsin fired from the post five months ago after five years on the job, the same man who is widely believed to have steered Russia into its current crisis. Under the constitution, the parliament has three opportunities to confirm the president's nomination, or else Yeltsin can dissolve the parliament and call for early elections.
The Communists want Yeltsin to yield some of his constitutional authority in exchange for their support. That's something Yeltsinwho rules Russia like a czar, by presidential decree instead of by lawis, so far, unwilling to do. But he may have no choice.
Despite the upheaval, Bill Clinton has gone ahead with his scheduled Moscow summit with Yeltsin. That's perhaps to escape his own domestic crucifixion, criticism, and ridicule. But the situation is so bad that there isn't even a cabinet in place for Clinton to meet. (Given the shaky grip that both Clinton and Yeltsin have on power, it's no surprise that comparisons to President Richard Nixon's visit with Soviet leader Leonid Brezhnev just before Nixon resigned in disgrace have already been made.)
Last week, Russia revealed to the world what many Russians knew too well: post-Communist Russia is a house of cards. One flick, and the ruble turns to rubble. Many members of Russia's current ruling elite are kleptocrats who ferociously protects their pocketbooks. Though they are criminals, they are capitalist criminals. And that means no return to Communismif the kleptocrats can help it.
While the rich prosper, many ordinary Russians are regularly not paid for up to nine months at a time, and, in some cases, years. But they aren't ready to turn the clock back eitherat least not yet. Nor is Russia, for all its madness, another Indonesia. On Monday, word spread that Yeltsin was thinking about implementing emergency rule. Yet while few Russians have ruled out the possibility of massive strikes and riots, they don't foresee any such chaos in the near future.
That might surprise some of the viewers watching footage of the Russians who line up, day after day, to withdraw their life savings from banks on the verge of collapse. But the media picture is distorted. Despite last week's early television images, there is for now no panic on the streets of Moscow, no frenzied anti-American sentiment. Walk down Moscow streets, and the shops and cafés and parks are full. Indeed, it's difficult to tell there's a crisis underway. But the uncertainty lingers.
When Russia suspended trading on the Moscow Interbank Currency Exchange last week, the offical rate was 7.9 rubles to the dollar. That jumped to 12.8 rubles on the street last weekend. On Monday, the official rate was announced at 9.3 rubles to the dollar. At the same time, black markets reminiscent of the Cold War era sprang up again, as young men skulked near exchanges, luring away business. While such trading no longer merits the death penalty, police are standing by to ensure that the "speculators," as they were called during Soviet days, aren't short-changing customers.
Some stores closed, more stayed open, and a few operated with limited goods. Last season's summer clothes lay piled up in the front of a boutique on the New Arbat, but the owners had removed all the new merchandise. Beside the store, 20 people stood in line to swap rubles for dollars at a currency exchange.
Some stores ignored the crisis altogether, leaving prices as they were. In a few groceries, however, clerks blocked off aisles and raised prices as fast as customers were buying products. Russians, especially those who remember Soviet-era scarcities, were stocking up on consumer goods, filling boxes with toiletries and food staples.
GUM, the century-old department store by Red Square, was mobbed with Russians. Appliance stores sold out of big-ticket items like washing machines. Jewelry stores were packed.
There was talk that casinos were jammed with people trying to get rid of their rubles. But past the thorough gun check and into the main room of the Metalitsa casino around 2 a.m. on Sunday, it was business as usual: the typical mix of businessmen, diplomats, and young New Russiansfairly busy, but far from frenzied.
"We can't really see a crisis here," said floor manager Cheddo Ristich. "The casino isn't a shop. We don't sell anything." Nevertheless, Ristich, a Serb, said he was surprised that more people weren't trying to dump their rubles.
"I was trying to get rid of my rubles yesterday," Ristich said, adding that he is holding off paying his bills. "My phone bill of $200 will now be $130."
Back on the street, most stores and restaurants had stopped taking credit cards. Russian banks have frozen all hard currency accounts and continue to stall Russians who want to withdraw their ruble savings.
Many Russians at the exchanges never even use banks anymore. Marina Votiyeva, a 35-year-old single mother and casting director at MossFilms, Russia's largest studio, changed 1.9 million rubles on Sunday. She keeps her monthly salary of $1000 at home, and, like many Russians, she now saves practically nothing. "I haven't used a bank since 1994," she said. That's when she lost her savings$3000. (Her father lost his savings in the current crisis.)
Even so, Votiyeva remains optimistic that Russia's fortunes will improve. "Maybe it's just my nature to think this way," she said.
However, she added: "I'm afraid for my little son. If people lose everything and can't buy bread, there could be riots. I hope not, but it's possible."
Foreigners working in Moscow and tourists were left without any cash at all. Most ATMs had been shut down and banks refused to accept wire transfers. "No one has been able to get money anywhere," said Monique Couture, a lawyer with the Canadian law firm of Gowling, Strathy, and Henderson. "I'm going home at the end of the month and I'm thinking of bringing enough cash to last until November [her next trip home]."
On Saturday morning, the Starlite Diner, a favorite expat brunch spot, was packed, even though the rubles-only, nocredit card sign caught some people by surprise. Diners were glued to the Moscow Times, a free English-language newspaper, and words like "crisis" and "ruble" and "business deal collapse" hovered over the servings of malted milks, Dunkin' Donuts, and greasy burgers.
"Where there's crisis, there's opportunity," said Malloy, over a brunch of cheese fries and nachos.
"None of my investors are pulling out," added Quinn.
In just one week, Moscow has spiraled back to the instability of 1991. This time, though, the slate is not clean. The euphoria that came with the collapse of Communism is over. The West is now disillusioned with Russia, which is seen to have brought the crisis on with its lawlessness and limitless capacity for greed and corruption. The Russians themselves no longer have faith in their leaders or democracy. Nor do they continue to believe that after the suffering comes the euphoria of capitalism. Still, capitalism has brought conveniencesand private propertythat will be difficult, if not impossible, to give up.
The Road to Ruin
While no one could have predicted when the Russian debacle would happen, it was nevertheless inevitable. The current crisis began to build in March, when Yeltsinin a surprise movesacked his entire cabinet. At the same time, unpaid miners, whose strikes were instrumental in building popular support for Yeltsin before the collapse of Communism, began to step up their strikes against him. By August, the International Monetary Fund's $22 billion bailout package was in place, but it was unclear how the money was spent.
Events sped up on August 13, when New York-based speculator George Soros declared that Moscow should devalue the ruble. On August 14, Yeltsin said there would be no devaluation.
But on August 17, Moscow floated the ruble, effectively devaluing it. Moscow also called for a 90-day moratorium on repayment of some foreign debts and announced a restructuring of the ruble-based debt. The Russian media dubbed it the devaluation of the president.
On August 21, the parliament called for Yeltsin to resign. Two days later, Yeltsin sacked his 36-year-old prime minister, Sergei Kiriyenko, and named Viktor Chernomyrdin as acting prime minister.
Chernomyrdin is a favorite of the corrupt elite. And Kiriyenko was not. In his five months on the job, the previously obscure oil and energy minister had challenged the so-called oligarchs, the businessmen who own Russia's top post-Communist industries, natural resources, banks, and media. Those moguls had claimed responsibility for Yeltsin's reelection in 1996, but Kiriyenko demanded that their companies pay taxes. Among his targests was Gazprom, Russia's natural gas monopoly, which Chernomyrdin himself had headed during perestroika days. J.G.
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