News round-up September 1998


Russia: President Boris Yeltsin has decided to remove part of his government, incuding the Prime Minister Sergey Kiriyenko, and replace him with the former Viktor Chernomyrdin, in order to avoid even deeper crisis in the country. The Communist-dominated parliament demanded that Boris Yeltsin surrender much of his constitutional authority to the legislature which gives expectation that president Yeltsim may resign. Michel Camdessus, Managing Director of the International Monetary Fund, has invited finance ministers from other emerging markets to a meeting to discuss policy if the crisis continues to spread.

During the economic summit in Spain, International Monetary Fund (IMF) Managing Director, Michael Camdessus, pointed out the importance of the fulfilment of the economic and financial reforms that had been planned by the Russian Government. He said that Russia must continue to withstand the pressure exerted on it and must carry out the tough measures agreed in July.

The IMF also said that no changes have been made in the earlier announced schedule of the next credit tranche of US$4.3 billion due in September. It is also expected that if the Russian side meets its commitments, the Fund will allocate the earlier delayed part of the July credit tranche of $800 million, and, therefore, the total sum to be given to Russia this month may amount to $5 billion. (Ria Novosti, 17/08/98)

In a joint statement by the Government and the central bank, it was announced that the Government stabilisation programme is not to be changed. Prime Minister Sergey Kiriyenko said that the priority of the joint policy is to secure economic growth by implementing the Cabinet approved programme, which is seeking the attainment of a balanced budget and industrial recovery.

Russia introduced a floating rouble rate within the limits of a currency corridor from six to 9.5 roubles against the dollar. Explaining why this very moment has been chosen for the establishment of the new currency corridor, Kiriyenko said that "until recently, there have been chances to act without any tough measures. If we had succeeded in implementing the measures provided for in the government bills, the situation might have been a great deal better. Instead, we are facing an unfavourable coincidence, including the slumped prices for oil and gas, our staple exports".

The Russian cabinet session has decided that the 1999 draft budget will be submitted to the Government before 7 September and to the Duma before 21 September. Restructuring of GKOs (Treasury bills), triggered the adjustment of budget parameters and are to be included in the draft document.

On 17 September Moscow offered to renegotiate its effective default on US$40 billion of domestic debts to avoid proceedings against Russia by its foreign creditors . However, the terms (worth four cents on the dollar) were considered "unacceptable" by western banks (Financial Times, 18/09/98). The announcement of terms for the exchange of GKOs and OFZs (short-term rouble denominated government bonds) was also delayed by a week.

Russia missed virtually all of the interest repayment of DM800 million (£267 million) that was due on 20 September. Prime minister Yevgeny Primakov stated that Russia would not have to default on its debt, but appealed for extra financial support for future reforms. The central bank printed Rbs1 billion (£37 million) of new money the next day, and there were later allegations that the finance ministry was planning to cover the budget deficits by printing more money. This could jeopardise the International Monetary Fund (IMF) support loan: the next segment is due soon, worth US$4.3 billion dollars.

Russia: Sergey Kiriyenko is planning a meeting with foreign investors. The Russian side will involve Anatoly Chubais, lead negotiator with international finance institutions, Boris Fyodorov, Deputy Prime Minister and Head of the Federal Tax Service, Mikhail Zadornov, Federal Finance Minister, and Sergey Dubinin, Chair of the Central Bank. The meeting will focus on the situation of Russia's financial market. The Russian delegation plans to inform the foreign investors on rescue measures drafted by the Cabinet. Such meetings are held on a regular basis.


Albania: There were two days of rioting in the capital Tirana in mid-September, the worst violence for 18 months. Sali Berisha, the former president, denied attempting a coup on the current government. He called for widespread protest against Fatos Nano, the socialist prime minister, for the killing of Azem Hajdari, which went on for several days.

On 29 September, the current president Rexhep Meidani invited Pandeli Majko, secretary-general of the ruling socialist party to form a government, as he felt internal division had made it impossible for himself.

Azerbaijan: On 20 September, 10,000 opponents of President Haydar Aliyev protested against the detention of his political detractors and called for his resignation from office. The protest was called by around a dozen political parties, boycotting the elections of 11 October on the grounds that Aliyev had too much control over the Central Elections Commission, thereby corrupting them.

Bosnia: The first round of the presidential elections appear to have been won by Nikola Poplasen, the ultra-nationalist Bosnian Serb leader, showing a trend towards radicalism (despite earlier allegations by ultra-nationalist parties of election-rigging aimed at the Organisation for Security and Cooperation in Europe, or OSCE). Although the final results are not known, it is unlikely that Biljana Plavsic, president of the Serb-controlled half of Bosnia, will catch up, despite western support.

Russia: The political pressure on Yevgeny Primakov to solve the current economic crisis by printing more money from figures such as Yuri Luzhkov, mayor of Moscow, continues.

Serbia: International feeling regarding the actions of the Serb special police in Kosovo continue to run high, with the UK and France urging the United Nations (UN) to bar flights by JAT, the Yugoslav airline, in mid-September; and Russia abandoning its resistance to the UN resolution that could lead to the use of force in the Serbian province of Kosovo on 22 September. Claims of a ceasefire from Zivadin Jovanovic, the Yugoslav foreign minister, on 29 September were overshadowed by the discovery of one of the worst atrocities in Kosovo so far.

Slovakia: The Slovakian government led by Vladimir Meciar was defeated in the governmental elections. His party won 43 seats, defeated by the four opposition groups; who formed an alliance totalling 93 seats altogether, and pledged not to co-operate with Meciar. There are now hopes of rebuilding foreign relations: Slovakia is the only candidate to be rejected from EU and Nato membership, due to its questionable record on democracy under Meciar÷s leadership. Action has been urged on the country÷s economic crisis: the government budget deficit is running well over the target for 1998.

Russia and Ukraine: The Ukrainian leader Leonid Kuchma and the Russian president Boris Yeltsin met mid-month, aiming to set up a joint anti-crisis committee and redevelop former trade links. This move was prompted by the economic situation in both countries.


Russia: A survey released on 17 September by the American Chamber of Commerce showed fifty large US companies had lost $500 million in Russia: 72 per cent of US businesses in the survey could not access funds frozen in Russian banks; while 58 per cent have not been paid for their goods. However, only one per cent said that they were not prepared to stay in Russia, despite substantial work force cuts.

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