Last Month’s Article reported on the difficult situation in Russia and pending financial crisis. This month’s article will continue to examine the Russian political and economic landscape suggesting nothing short of a modern-day miracle (or divine intervention) will be able to remedy her increasingly desperate situation. Of particular note in the news is that Russia is unable now, and in the near future, to feed the nation. People may put up with a lot, but a shortage of basic food frequently leads to revolt.
Continued financial chaos
As reported in the September 15, 1998, New York Times: “The latest move by the Russian central bank allows the country’s insolvent banks to use approximately $1.65 billion in scarce reserves. This would allow them to process customer bills which have gone unpaid during the recent crisis. As well, financial activity has been at a standstill as the lack of cash has led banks to stop processing bill payments.”
The government, while believing that freeing up the reserves will facilitate financial activity, is gambling. Many of the banks operate like freewheeling speculative funds, and it is feared they may not use the rubles as intended. Several months ago when the International Monetary Fund (IMF) provided funds to the central bank, banks used the money to buy dollars, driving down the value of the ruble.
Also of concern to the IMF is the statement by the central bank that it would respond to the current crisis by printing more rubles, a move that will no doubt prove inflationary. As the New York Times reported, “Russian finance is essentially a shell game right now, with the government’s printing press issuing increasingly devalued rubles in an effort to create enough momentum so the economy can begin creating real value again.”
Continued political uncertainty
During the past month in the Russian parliament there have been resignations, political foul-ups and the usual acts of non-compliance. Russian newspapers have indicated the newly confirmed Prime Minister, Yevgeny Primakov, is struggling to keep together his government Boris Fyodorov, the government’s most outspoken reformer, was removed from his position as chief tax collector and top economic policy maker, even though he has credibility with the West and was the chief contact with the IMF. Other resignations have increased the pressure on the prime minister to make good on his promise to assemble a “well-oiled professional team.”
The Kremlin talks about implementing a new “stabilization program” within the next ten days. To prevent increased social disorder, it has reportedly sent wages to the military, students and hard-hit regions. This talk has little apparent impact, however, as the prevailing mood continues to be one of desperation.
President Boris Yeltsin’s role in the political arena is not viewed as influential and his views are no longer seen as relevant. He has been humbled and isolated by recent political events and there is much speculation regarding how much longer he will remain in office.
Critical Russian service shut down
The Russian postal service is broke. As reported in the New York Times, October 3, 1998: “More than 1,000 mail cars full of tons of mail and packages have been sidetracked because the post office has not paid its bills to the State Rail Ministry. Air mail is suffering from the same malady with major airports demanding past dues from the post office before releasing the mail. Delivery of mail has fallen weeks and, in some cases, months behind.”
This is a critical situation in Russia. Millions of people use the mail to send canned goods and other necessities to needy relatives and friends in other parts of the country. Russia is a country where people rely on the mail for communication — in some regions, the mail is the only way to get any news.
Facing severe food shortages
The October 10, 1998, New York nines reported: “Rocked by its worst harvest in 45 years and a plummeting ruble, Russia appealed today for relief aid from the European Union. It has also approached the United States and Canada for help. Though Russian officials are still trying to figure out how much help they need there is no mystery about why the Kremlin is asking. Russia is being pushed to the brink, anxiously facing a harsh winter and fearful that it may lack the food, medicine and power to get by.”
Russia’s grain harvest this year will reach about 52 million tons, down from 88 million tons last year. According to a new projection by the United States Department of Agriculture, this would make it the worst harvest since 1953. When one considers that Russia consumes approximately 70 million tons of grain a year, it is easily understood that a grain shortage is a very real possibility.
The question that was posed last month remains. Could a conquest to the Middle East be made to restore pride and seize great wealth? Russia, led now by an ex-spymaster, could easily be motivated and drawn into the Middle East simply to help fill its storehouses with grain. This sad fact, combined with Russia’s other economic woes, may provide the impetus required to force Russia in a southerly direction.
The Origin of the Organic World – Part One