Russian Stocks Resume Decline, Sparking Fears of Financial Crisis

Despite a massive infusion of funds from the International Monetary Fund and other lenders, Russian stocks have resumed their steep decline--reflecting a lack of investor confidence that increases the likelihood of another full-blown financial crisis, according to analysts here.

The stock market dropped 9% Monday, the largest one-day decline since June. Buyers of Russian treasury bills are demanding as much as 74% interest, an unbearably high rate for the cash-starved government. Analysts said they sense renewed fear that the government will be forced into devaluing the country’s currency, the ruble.

“It’s looking ugly again,” said Al Breach, an economist with the Russian European Center for Economic Policy.

How investors behave is critical to the Kremlin because it must sell and refinance government bonds to stay afloat--not to mention that it needs foreign capital to build a market economy. The government and its international lenders, chiefly the IMF, hoped to restore investors’ confidence with last week’s announcement of a $22.6-billion rescue package.