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Russia: Currency Crisis Endangers Reform Process

By Yuri Zhigalkin and Matthew Frost

New York, 28 August 1998 (RFE/RL) - Marshall Goldman of the Russian Research Center at Harvard University told RFE/RL in a telephone interview yesterday that the currency crisis in Russia--where the value of the ruble is plunging dangerously against the dollar-- endangered the whole reform process in Russia.

Goldman said that, in a worst case scenario, Russia could be set back years to the pre-market economy of state centralization. Virtually all economic activity has ground to a halt, he said, since businessmen and enterprises can neither access their dollar funds nor receive the necessary credit to carry on trading. This in a country which imports more than 50 percent of its consumer goods.

Goldman said the absence of hard currency will increase the tendency towards a barter economy and thus move the Russian economy even further way from the world economy than before the crisis struck.

Commenting on the catastrophic fall in the value of the Russian stock market, Goldman added that investor confidence is being further sapped by the power vacuum in the country. For the first time in many years, Goldman noted the deterioration in the economic situation in the country could lead to far-reaching political changes.

Goldman was scathing in his assessment of newly appointed acting prime minister Chernomyrdin's credentials for leading the country out of the present financial crisis. Goldman characterized Chernomyrdin as a man incapable of instituting economic reforms in his previous five years in office and as someone willing to invite opponents to reform into his cabinet. It is therefore hard to imagine, concluded Goldman, that Chernomyrdin has the political will to implement the necessary reform program.