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Friday, August 28, 1998 Published at 18:22 GMT 19:22 UK


Can the Russian economy be saved?

Can Mr Chernomyrdin (right) persuade IMF chief Michael Camdessus to release money to Russia?


Konstantin Eggert of Izvestia newspaper and Peter Oppenheimer, former consultant to the Russian Government, discuss the crisis
Few solutions to salvage the Russian economy present themselves.

Essentially, the main problem facing the government has not changed since the crisis: It needs to raise more revenue.

Debt has forced the government to default on around $40bn worth of rouble debts, which has had the effect of frightening away all the country's foreign lenders.

So Mr Chernomyrdin's new government will probably have to look inward for solutions.

Printing more roubles

The Communist Party, which may end up with several ministers in the government, is proposing to bring back Soviet-era price and currency controls, also favouring printing more roubles to pay off internal debts.


[ image: Food prices are set to go sky high]
Food prices are set to go sky high
While that might stabilise the situation in the short term, it could also lead to the return of the black market and empty shops.

And the inflation that would result from a flood of newly-printed roubles would have the effect of wiping out the savings of Russia's incipient middle class.

For the country's poor, the fall of the rouble means misery on a smaller scale.

Price rises affect some people less as many Russians grow their own food anyway to survive.

And in the short term some impoverished workers may even feel some benefits of the devaluation as it will allow the government to pay overdue - albeit devalued - wages.

Business bail-out

One measure that might be both popular and lucrative is re-nationalising the oil companies, which were bought up cheaply by Russia's business tycoons.


[ image: Reforming economist Anatoly Chubais has also been axed]
Reforming economist Anatoly Chubais has also been axed
That may prove politically impossible because it was those same tycoons, notably Boris Berezovsky, who helped Viktor Chernomyrdin to return to power.

The political clout of the big businessmen will probably protect them from the worst effects of the crisis, and they be integral in helping rebuild the country when the worst of the crisis passes.

But many Russians blame them for causing it in the first place by stripping Russia's assets and failing to pay enough taxes.

And as Russia slips further into economic meltdown, the likelihood of September's credit injection from the International Monetary Fund looks in doubt, particularly as the reformist debt negotiator, Anatoly Chubais, has been sacked again.



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