Pledging to Safeguard Ruble, Yeltsin Orders Economic Reforms

President Boris N. Yeltsin brashly promised Thursday that “Russia’s financial market will not collapse” and vowed to protect the ruble from devaluation and a new spiral of rising prices.

After summoning the country’s key economic strategists to an emergency Kremlin meeting, Yeltsin sought to assure worried Russians that the chief success of his nearly seven years in the presidency--a stable ruble with inflation under control--will not be lost because of government overspending.

Yeltsin issued a sheaf of edicts demanding belt-tightening on expenditures and a fresh crackdown on epidemic tax evasion to boost revenue. He pointedly targeted Russia’s newly rich industrialists with a proclamation empowering police to seize the property of those in arrears on their taxes.

Russia suddenly finds itself in the midst of another financial crisis because its failure to collect as much tax revenue as projected in this year’s budget has not been matched by reductions in spending. On the contrary, the government has had to boost the interest rate on its short-term treasury bills to a staggering 150% in hopes of drawing enough investment to pay off earlier borrowing that has now come due.

The federal government has paid dearly to prop up the ruble against a surge of nervous Russians trading their currency for the more predictable dollar amid global economic turmoil. Hard-currency reserves that stood at $24 billion a year ago were down to $14.5 billion Thursday, the Central Bank reported.

Yeltsin insisted that the government will make protection of the ruble its highest priority and promised Russians there will be no devaluation.

“The Central Bank and the Finance Ministry today have enough reserves to hold on,” Yeltsin said in a television address that he ordered national networks to broadcast.

While the edicts issued by Yeltsin were reminiscent of Communist-era command tactics for managing economic affairs, they appeared to have some calming effects on a jittery public. Although Russians continued to dump rubles for dollars at an alarming rate, the run eased slightly from the panic levels seen in recent weeks.

But even senior officials within the Russian leadership acknowledged that the Kremlin has failed to change its borrowing and spending behavior since a similar financial crisis in late 1996, squandering the international credits extended for a bailout at that time and racking up ever higher debts.

Prime Minister Sergei V. Kiriyenko told Cabinet officials the crisis was caused by government “failing to live within our means.” But, like Yeltsin, he predicted that the teetering markets will stabilize soon.

Resources have been dwindling in part because of slumping world prices for Russia’s main export commodity--oil--but also because “the government let down the reins as regards the economy,” said Yegor S. Stroyev, speaker of the Federation Council, the upper house of parliament.

The Kremlin also was blamed by tycoon Boris A. Berezovsky for “not demonstrating the necessary will and confidence” to deal with the crisis.

Finance Minister Mikhail M. Zadornov tried to assure ordinary Russians that they will not suffer because of the financial crisis, but citizens jaded by previous collapses expressed little faith in his words.

“I remember too well what happened overnight in 1991 when my life savings turned into what could buy only a pound of sausage,” real estate agent Dmitri Sopin said.

Many Russians keep their savings hidden at home and in dollars. Only those invested in Russian markets and those about to make a major purchase in rubles were paying much heed to the turmoil.

“Foreign investors have become very reluctant to invest in Russia now, and I can understand that,” said Sergei Rebotenko, deputy director of the BNP Invest fund management office here. But he predicted that the crisis will blow over in a month or two if the government persists in backing the ruble.

In another troubling development, some Russian state agencies sought to suggest that Western investors were to blame for the latest troubles.

The State Statistics Committee published a report showing that Westerners had sold 90% of their Russian stock holdings of a year ago, while more than doubling investments in the short-term treasury bills to cash in on the liquidity crisis.

Foreign investors have been earning $50 million a month on their securities investments and have been paying no tax on their huge earnings because nonresidents are exempt from a new securities tax code, a senior Russian tax official disclosed.

The report by Vladimir Oskin, deputy chief of the International Tax Relations office, appeared aimed at shifting whatever public ire results from the crisis away from federal authorities and onto Western investors. He claimed in the same report that foreign companies owe the Russian government $150 million in delinquent taxes.

However, other government sources told the news agency Itar-Tass that the biggest debtors to the public coffers are some of Russia’s wealthiest and most powerful government-held monopolies.

A senior official from the International Monetary Fund arrived Thursday to try to expedite release of $670 million in credits to ease the crisis. Earlier IMF negotiations had ended with postponement of the funding release because of Moscow’s failure to more aggressively collect taxes.