[PEN-L:1375] Russia: Wall Street Sent Reeling

[Gregory Schwartz <grishas@xxxxxxxx>]

This is the latest from The Times (of London)

Greg.

****
                       Wall St. sent reeling by
                              Russian crisis


FROM BRONWEN MADDOX IN WASHINGTON AND
                RICHARD BEESTON IN MOSCOW

  WALL STREET shares suffered their second-biggest
  points fall last night after Russia's economic crisis
  deepened with the parliament's rejection of President
  Yeltsin's choice of Prime Minister.

  As President Clinton boarded Air Force One for a
  three-day visit to Moscow, brokers were looking aghast
  at the neon displays confirming that yesterday's sell-off
  had wiped out the market's entire rise for this year.

  At the close, the Dow Jones index had fallen by 512.61
  points - 6.3 per cent - to 7539, taking it below the 8,000
  mark for the first time since January. The Dow had nearly
  quadrupled from 1990 to its peak on July 17, but it has
  fallen by nearly 20 per cent since then.

  London share prices are also expected to open sharply
  lower today. The market was already in decline and the
  FTSE 100 index dropped by more than a hundred points
  on each of the last three days of trading.

  The latest alarms came in response to the growing crisis in
  Russia and the deepening economic turmoil in the Far
  East. In Moscow yesterday, deputies in the Duma voted
  by 251 to 94 not to endorse Viktor Chernomyrdin as
  Prime Minister, leaving the country rudderless at a time
  when crucial decisions are needed to save the
  near-bankrupt economy.

  Aleksandr Kotenkov, Mr Yeltsin's representative in
  parliament, said that if the politicians could not put their
  differences aside quickly, Russia could lurch into even
  greater economic chaos and trigger civil strife. "If this
  chaos lasts for several more weeks, it may happen that
  there will be neither Communists nor us," he said. "I mean
  a popular uprising, merciless and senseless."

  In the Duma - the lower house of parliament - speaker
  after speaker from across the political spectrum had
  attacked Mr Chernomyrdin's record in government. But
  he emerged impassive from the chamber to make clear
  that he had no intention of backing down and that he
  would again seek confirmation next week. Indeed Mr
  Yeltsin had resubmitted his name within hours of the vote.
  "This country cannot continue without a Government," Mr
  Chernomyrdin said. "No matter what, I must make
  decisions because life goes on. I will deal with this."

  A candidate for Prime Minister can go before the Duma
  three times to seek confirmation. If he is rejected on the
  final vote, parliament is dissolved and fresh elections held.
  The country endured a similar spectacle five months ago
  when Sergei Kiriyenko won confirmation on the last vote,
  mainly because deputies wanted to avoid elections. The
  same reasoning may apply again, except that Russia can ill
  afford to be without an effective Government while its
  economy falls apart.

  In particular, Russia desperately needs the next tranche of
  IMF loans worth $4.3 billion due in mid-September. But
  no money will be forthcoming until a functioning
  Government with a clear financial policy is in place, and
  although there are behind-the-scenes efforts to revive the
  power-sharing compromise worked out at the weekend,
  the rouble began to slide again as soon as word of the
  latest stalemate filtered out.

  The Duma's failure to endorse Mr Chernomyrdin also
  means that President Clinton arrives today empty-handed,
  since his repeated offers of help have been conditional on
  economic reform. With the Dow Jones diving as he left
  Washington, he described the trip as an example of one of
  the most important lessons every child had to learn: "We
  are living in a smaller and smaller world. This global
  society, this global economy, is real. Our economies are
  increasingly interconnected."

  Wall Street's extraordinary eight-year rise has been driven
  by the apparently unstoppable growth of the American
  economy, and the turmoil gripping more than a third of the
  global economy has actually helped by pushing down the
  cost of oil, gas and other commodities. But the markets
  now fear that America will not be able to insulate itself
  much longer.

--
Gregory Schwartz
Dept. of Political Science
York University
4700 Keele St.
Toronto, Ontario
M3J 1P3
Canada

Tel: (416) 736-5265
Fax: (416) 736-5686
Web: http://www.yorku.ca/dept/polisci