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Russia: Government Searches For Bailout Loan As Crisis Deepens

Prague, 9 July 1998 (RFE/RL) - Russian officials today scrambled to obtain an emergency bailout loan amidst a cash shortage as the deadline approaches for the repayment of billions of dollars in government debts. Meanwhile, social unrest continued across Russia today as miners seeking unpaid wages blocked freight traffic on the Trans-Siberian railroad for a seventh day.

Russia's envoy for talks with the International Monetary Fund, Anatoly Chubais, said after meeting IMF negotiators in Moscow today that an agreement on a rescue loan of up to $15 billion could be reached by tomorrow. But IMF officials say there is "no deadline" on reaching a deal. Talks are expected to continue tomorrow.

The IMF has previously insisted on new revenue policies as a sign that Moscow is serious about reforming its finances. There are concerns that the Duma will not have time to approve tax changes and other reforms before breaking for vacation on July 17.

Russia's Central Bank announced today that it spent nearly $1 billion from its already depleted reserves to support the ruble in the last two weeks. Dwindling reserves are weakening the Central Bank's ability to support the ruble. Russia's reserves now stand at $15 billion, down 15 percent since the beginning of the year.

In an apparent bid to restore confidence in the financial markets, President Boris Yeltsin today vowed that Moscow will protect the ruble from a devaluation. Yeltsin told reporters that Russia has "the ability, resources and a plan of action" to support the ruble.

But the president's remarks did not bring about a market rally. Russia's benchmark stock index, the Russian Trading System (RTS), fell to its lowest level in 25 months. It has lost two-thirds of its value since the beginning of the year, making it the world's worst performing key index.

The cash-strapped government still must find ways to pay off $6.6 billion in debts this month and a total of $30 billion by the end of this year. As interest rates skyrocket, the cost of borrowing money on the Russian bond market has become so expensive for Moscow that the government is becoming trapped in a spiral of debt. A bond auction yesterday failed to raise enough cash to pay off $1 billion of debt due this week.

Meanwhile miners seeking unpaid wages continued to block freight traffic on the Trans-Siberian railroad for a seventh day today. Deputy Prime Minister Boris Nemtsov appeared at an emergency coalminer's congress in Moscow to urge workers to halt their protests and to be patient. Nemtsov said more government money will be made available to the coal sector. But he said much will depend on the outcome of the state's battle against widespread tax evasion.

See related story: Russia: Yeltsin Faces New Doubts