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RUSSIA IN CRISIS

In Moscow, Residents' Fears Mirror Fiscal Crash

Economy: Even those used to periodic crises are surprised by recent developments. 'I see no reasonable face on TV who can handle this,' one says.

September 01, 1998|ELIZABETH SHOGREN | TIMES STAFF WRITER

MOSCOW — The chilly rain and umbrella-reversing wind matched the mood Monday as Muscovites struggled to understand their country's fiscal and political crises and to minimize the pain for themselves by withdrawing their savings from banks and stocking up on supplies.

Marina Valyova said it was "normal hysteria" that drove her and her mother to the bank to collect their entire savings--equal to about $1,000--in rubles. After some suspense, they learned that they could get the money, but at a different branch.

Russians have weathered several rounds of economic crisis over the past decade as the Soviet Union crumbled and Russia underwent a halting transition from a centralized economy to a market system of sorts.

But Valyova and other Muscovites said they had grown accustomed to the relative stability of their currency and economy over the last three or four years and were caught by surprise and deeply distressed by the current economic crash. The behavior of their political leaders in recent days has magnified their dismay.

Expecting the Worst

"If we heard some more or less believable assurances from our so-called politicians, perhaps we could still have faith in economic recovery," said Valyova, who tutors children in government and history for exams. "But when they make decisions only on the basis of politics, we can only expect the worst."

Valyova and several other Muscovites said any hopes they had that politicians from opposing groups would put politics aside and work together to pull the country out of crisis were dashed during Sunday's "Itogi" television news program. The leaders of the various factions in the Duma, the lower house of parliament, were guests. Each in turn criticized the others, along with President Boris N. Yeltsin and his prime minister-designate, Viktor S. Chernomyrdin, and made it clear that the future would hold more political battles and not a collaborative effort to combat the crisis.

Sergei Skatershikov, a successful young entrepreneur, said he was sure Chernomyrdin would be the next prime minister until he watched "Itogi."

"I was shocked," said Skatershikov, whose companies provide financial information and services to investors in Russia and other emerging markets in the former Soviet Bloc. "I see no reasonable face on TV who can handle this. Yeltsin is really crazy. Chernomyrdin was the guy who built our economy into a Titanic" over the five years he was prime minister.

Unlike many of his Russian competitors, Skatershikov has been able to keep his businesses afloat because he diversified into other markets last year in anticipation of a crisis in Russia. But even he has had to lay off 30 employees this year. Many of his competitors in Russia have folded or are on the verge of doing so.

The current economic troubles target a different group of people than did Russia's economic crises in the late 1980s and early 1990s, which were most painful to average citizens who had to search to find basic groceries and household products and stand in long lines to buy them.

Now, the new middle class, and even some of the wealthy, stand to be hurt as the value of the ruble plummets, banks go bankrupt and businesses fold. These are the people who have worked hard under Russia's new economy and found ways to earn and save money. Many of them find their jobs, earnings and savings in danger.

"It's more threatening for people of our circle," said Lena Vrono, a psychologist who is part of the growing middle class that has benefited greatly from the new freedoms--both economic and political--that Russians have enjoyed in recent years.

Private patients, who pay most of Vrono's salary, have already started canceling appointments because the economic tough times make seeing a psychologist seem like a luxury.

Panic About Future

"There's no difficulty buying the most necessary goods or fear of going without food like in 1990 or 1991," Vrono said. "It's the horrible panic of not knowing whether all we have worked for these past several years will be gone."

The countless Russians involved in small-scale trade are also victims.

Igor Shishkin's shoe business involved buying foreign-made shoes with dollars and selling them to Russian stores for rubles, which he converted into more dollars to buy more shoes. This was all possible and legal 10 days ago. But as the ruble tanked, he had to double prices to cover his costs, making the shoes too expensive for buyers in Russia. It also became impossible to convert rubles into dollars to buy more shoes. Now his business is on the verge of ruin.

"My clients call me every day. They are losing money too, so they are losing their trust in me," Shishkin said. "I am suffering serious losses."

Although this crisis differs fundamentally from earlier Russian economic troubles, many here have responded by reverting to typical Soviet-era crisis behavior.

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