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Amid Public Fury, Yeltsin Softens Order Recalling Old Rubles : Russia: Deadline for exchange is put back. Izvestia indicates vacationing president hadn't been told of plan.

July 27, 1993|CAREY GOLDBERG | TIMES STAFF WRITER

MOSCOW — Facing popular fury and political fallout, Russian President Boris N. Yeltsin on Monday watered down his government's surprise order recalling all pre-1993 ruble bank notes.

In a presidential decree issued less than a day after he cut short his vacation to deal with the mounting crisis in Moscow, Yeltsin moved back the deadline for Russians to turn in old bills for new ones and increased the amount they could exchange.

The softening was meant "to protect the rights and legitimate interests of citizens," the official Itar-Tass news agency said.

But the presidential intervention came too late to avert three days of anger and nerve-straining anxiety for many Russians, particularly the elderly and the poor who feared losing what little money they had when stores stopped accepting pre-1993 rubles Monday morning.

"I can't buy my medicine with old money, and it's all I have," worried Yekaterina Nikitina, a 70-year-old retiree with a heart condition waiting in a line of more than 100 people outside a Moscow savings bank to exchange her old money. "What is going on? How can we live this way?"

Accompanied by reports that neither he nor his finance minister had prior knowledge of the monetary reform, Yeltsin's move also did little to lessen the impression that, as the daily newspaper Izvestia put it, "All is not right in the Russian government."

"In circles close to the president, they confirm something amazing: The president did not know about the decision being prepared," analyst Otto Latsis wrote in Monday's Izvestia. "I don't think this should comfort citizens, but rather instill extra anxiety."

The announcement that the Central Bank of Russia was immediately withdrawing all rubles issued before 1993 had hit Russia like a thunderbolt Saturday morning.

According to rules that the bank had worked out with nary a leak, citizens could exchange up to 35,000 rubles--worth about $35--at savings banks for new rubles over the next two weeks. Any remaining old money had to be deposited in low-interest savings accounts that they could not touch for six months.

Yeltsin's decree Monday extended the deadline through the end of August and raised the limit from 35,000 rubles to 100,000--about $100. It also decreed that an unlimited number of 10,000-ruble notes from 1992 could be exchanged. But the president stopped short of revoking the Central Bank's move altogether, and agitation in banks and stores appeared likely to continue.

The Central Bank justified its Draconian move by saying that it was trying to combat inflation, now at about 750% per year, and to keep more than 1 trillion rubles still in the hands of other former Soviet republics from flowing into Russia. It claimed that only about 10% of the money now in circulation was issued before 1993 and said most people had only about $8 worth on hand.

But the monetary reform was so abrupt and painful for so many Russians that some observers--along with Finance Minister Boris G. Fyodorov, who was visiting the United States when the bank made its move--contended that it could only be a diabolical setup by Yeltsin's political enemies.

"Yet again we are making a fool of ourselves in the eyes of the whole world," Fyodorov fumed. "We are using Bolshevik methods of a Stalinist socialist nature to try to resolve economic problems in the context of a market economy. This is inadmissible."

Commonwealth Television anchorman Yevgeny Kiselev told viewers: "It seems that what we have here is a well-calculated political provocation. Or to put it in plain Russian, the president got framed big time."

Yeltsin's political opponents were indeed taking advantage of the situation. Parliament Chairman Ruslan I. Khasbulatov, Yeltsin's archenemy, declared that he was canceling the Central Bank's order and would call Parliament into session if it were not rescinded.

Technically, the Central Bank answers to Russia's Parliament, but Khasbulatov claimed he had no advance warning of the reform. The ruble recall did, however, have the official approval of Yeltsin's Cabinet.

Responses to the bank's orders varied among the former Soviet republics that had retained the ruble as their currency. Some, like Georgia and Azerbaijan, were pushed by the move to make the jump to their own currency faster than they had planned. Others, like Belarus and Armenia, stuck with the ruble but voiced indignation at the Russian bank's unexpected move.

The withdrawal of the old rubles appeared to be especially damaging to small businessmen and farmers, who keep enormous amounts of money in cash because Russia has barely begun to develop credit card and checking systems.

In the Russian Far East, Chinese and Korean traders who had sold millions of rubles worth of imported consumer goods appeared to be stuck with much of the cash. In Vladivostok, Itar-Tass reported, only the beggars were happy because passersby were sloughing off so many old rubles into their outstretched hands and hats.

At savings banks across Russia on Monday, concerned citizens arrived to get in line to exchange their old money as early as 5 a.m., and some lines extended for several hundred people.

"It's a shame, a shame for Russia, my God," said Anna, an elderly woman from Estonia.

In stores, salesclerks ran out of new money to give change to customers and ended up giving matches, Metro tokens and even chewing gum instead.

Some Russians caught unawares could not buy even a loaf of bread until they could exchange some old money for new. Russian tourists and vacationing students faced special difficulties, with many lacking enough new money to buy tickets home.

The ruble-dollar rate remained largely unaffected, with the ruble rising slightly to 996.50 to the dollar.

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