St. Petersburg, 4 September 1998 (RFE/RL) -- With the ruble losing more of its value with each passing day, and dollars nowhere to be found, Russians holding rubles have gone on a frenzied spending spree, dumping the currency before it becomes worthless.
Stores and cafes in St. Petersburg have seen brisk business lately. But supplies of consumer goods are dropping drastically.
Empty spaces on food shelves are now a common sight. St. Petersburg, as well as much of Russia, imports more than 60 percent of its food. These imports are rapidly declining. Importers and retailers say that food supplies to St. Petersburg have already decreased by about 33 to 50 percent, and things will get worse unless the government acts to stabilize the ruble, even at a low rate.
"The crisis and higher prices have led to a drastic decline in import," said Larissa Semyenova, general director of Lenfintorg, one of the largest importers of food and clothing in the northwest of Russia. "In fact, it would be more accurate to say that imports have come to a full stop."
As soon as the exchange rate becomes clear and more stable, imports will be able to resume, she added. But even then, consumer purchasing power will be much less than before and that will hurt business.
There is an increasing concern over return to the bad old days of constant shortages. "People are now fearful of a return to the early 1990s when there was little food in the stores," said Galina Kantratenko, a middle-aged woman who was shopping at Sitnie farmer's market on Thursday. "Up until recently we never thought that those days might return, and only now we are understanding that the past few years have not been so bad."
And there is a looming collapse of the banking system, which, analysts say, has a month to live unless the economy is stabilized.
On Wednesday, the Central Bank ordered six top commercial banks to allow its individual depositors to transfer their savings accounts to state-owned Sberbank. Most of those accounts are denominated in dollars, but depositors would only be able to take money out in rubles and according to an officially set rate of exchange.
Most of the six, such as Inkombank, Menatep, Most Bank, and Mosbiznesbank have branches in St. Petersburg. Most Bank's branch on Nevsky Prospect, the city's main drag, was still serving clients on Thursday, and jammed with about 40 customers. The crowd was orderly and calm, but nearly all were against the Central Bank's plan, saying they'd leave their accounts with Most. "The Central Bank's plan is terrible," said one woman who wished to remain anonymous. "Our deposits would become worthless."
Despite the Central Bank's order, many banks and clients are set to fight for their money. "If the banks do not pay out to individual depositors, I think there will soon be a large number of court cases to get their money back," said Yevgeny Sidirov, an analyst at Lenstroimateriali, a leading St. Petersburg brokerage. "No one wants their savings account transferred to Sberbank under such unfavorable conditions."
Lev Savulkin, senior researcher at the Leontief Center, a leading local think tank, said that "If this crisis and economic instability continues then we might see the total collapse of the city's, and Russia's banking system by end of September or early October at the latest."
Savulkin went on to say that to stabilize the economy, the government needs to cut state spending, lower taxes while at the same time strengthen tax collection, and it needs to announce how it will pay off the treasury bills in order to restore some level of investor confidence.
If the government does not take these measures, said Savulkin, the country would head down one of two paths: hyperinflation, or a return to a command economy with the nationalization of banks, currency controls, and food rationing.