Ruble Continues to Weaken as Criticism of Yeltsin Grows

Bewildered Russians watched their nation fall further into economic and political turmoil Tuesday after President Boris N. Yeltsin’s devaluation of the ruble.

Political criticism of Yeltsin’s move intensified, with the Communist-led opposition urging nationwide protests and renewing calls for Yeltsin’s ouster. The currency fluctuated wildly throughout the day, eventually declining still more in value while a key index of Russian stock prices plunged 9%, continuing a long slide.

Russian citizens, meanwhile, searched for U.S. dollars as a haven to protect their savings, with demand for the greenback so strong that many currency exchanges in Moscow and elsewhere exhausted their supply by midday Tuesday.

Most citizens, however, remained surprisingly calm, and prices of food and other goods were not yet being raised sharply in Moscow, although higher prices are seen as inevitable as a result of the devaluation. Russian authorities threatened to send out inspectors to guard against price gouging. Some panic buying and price rises were reported in outlying areas.

This all came a day after Russia effectively devalued the ruble, reversing a policy of currency stability that for more than three years had been the central plank of Yeltsin’s economic policy. Currency stability had been touted as one of his regime’s few solid achievements and gave millions of Russians relief after the hyper-inflation of Yeltsin’s early years in power.

But the stability policy proved unsustainable as the mounting Asian financial crisis and a drop in world oil prices damaged Russia’s emerging market economy. The Yeltsin government had been forced to spend billions propping up the ruble against mounting efforts by world currency traders to drive down its value.

Unable to afford to keep the ruble at unrealistically high levels, Yeltsin on Monday moved to devalue--in effect passing on the pain to his people.

The devaluation, and a 90-day moratorium on payments of some short-term ruble debt, unleashed a gust of criticism Tuesday, with Communist leader Gennady A. Zyuganov firing the opening shot in a battle that is expected to rage at an emergency session of parliament Friday. Charging that Yeltsin had “devalued himself,” Zyuganov exhorted Russians to begin mass protests in response.

“We’ve Woken Up in a Different Country,” a headline in the business newspaper Kommersant blared over a huge image of a blindfolded Yeltsin.

The ruble had been trading at 6.3 to the dollar before the devaluation, and the Central Bank said Monday that the outer limit will be 9.5 to the dollar by year’s end. Previously, the currency was allowed to fluctuate only by 15% on either side of 6.2 per dollar.

With the government hoping the ruble will drop no further than 7 per dollar this year, panicked currency traders drove the currency to rates below 8 to the dollar, and occasionally as low as 10 or 15.

Later, however, Russian television said street rates around Moscow had improved slightly by evening to just under 8 to the dollar.

The wild swings suggested that traders were uncertain about how far the ruble will fall.

In an effort to stem spiraling rates, the Central Bank said that any currency dealer who sells dollars for more than 15% above his buying price will lose his license, and the bank encouraged citizens to phone in and denounce profiteers. It was unclear how this restriction fit in with the administration’s stated free-market goals.

The main Russian Trading System index fell 9% to 99.58 on extremely limited trading.

Meanwhile, bankers scrambled to avoid a meltdown in Russia’s nascent financial sector. The Central Bank said it was weighing whether to give about 700 million rubles (about $100 million, at Tuesday’s rate) in overnight loans to the nation’s 12 largest banks to help them meet debt repayments and avoid falling too far in arrears. The dozen institutions are pooling resources to help get them through the crisis, but hundreds of smaller banks are facing failure.

“We should expect many commercial banks to fail,” said Peter D. Ekman, professor of finance at the American Institute of Business and Economics in Moscow.

But that would constitute only about 2% of Russia’s banking assets.

“Bank failures in Russia should not be the economic shock that they would be in the rest of the world,” Ekman said.

The Central Bank asked bankers to meet Monday to reschedule payments on international loans to Russian banks maturing in 90 days. Yeltsin’s call for a 90-day debt moratorium, intended to prevent bankruptcies, has been viewed with disfavor by Western analysts. Some say it will serve only to further damage Russian companies’ ability to secure foreign financing.

In Tokyo, Russian Prime Minister Sergei V. Kiriyenko asked Japan to speed up disbursement of $800 million in loans. A Japanese Foreign Ministry official said today that Kiriyenko wants $300 million by the end of the month and the rest by the end of the year. Japan and Russia agreed on the loan in July, but the disbursement timing was vague.

For more than two years, millions of Russians who work in the state sector have already suffered from late, erratic payment of their wages. With the private-sector workers of the new middle class squarely targeted by the latest move, Yeltsin’s popularity, already in single figures in recent polls, is likely to drop further and the risk of social unrest to rise as winter sets in.

For the moment, however, bewilderment rather than all-out panic seemed to be the most widespread response. News reports from around Russia suggested that ruble exchange rates were different in every city, with stores open as usual in Moscow but panic buying underway in some provincial towns. No clear tendency emerged among a people who, by and large, still do not really understand what devaluation might mean for them, or how to respond.

The Washington Post and Times wire services contributed to this report.