Russia's acting prime minister tried to reassure investors today after bonds plunged in value under a drastic plan to restructure Russia's enormous debts, but markets continued to fall.
The ruble also dived again as Central Bank support for the currency faltered, forcing the suspension of trading at the interbank exchange for a second day in a row. The ruble weakened by 5 percent, trading at 8.26 rubles to the dollar in contrast to 7.86 rubles on Tuesday.
In another sign of panic, the Central Bank canceled sales of dollars today to banks and other institutions, saying that kind of intervention would have led to new losses for the Central Bank's hard currency reserves. It was the first time the Central Bank had canceled already agreed sales during the current crisis, indicating the government was giving up efforts to stem the fall of the ruble.
Traders said banks apparently fled to the German mark because dollars were unavailable. The ruble plummeted likewise against the mark, reaching 7.6 to the mark over Tuesday's 4.49.
President Boris N. Yeltsin signed the decree on restructuring the country's $40 billion, short-term debt a day after terms of the plan were revealed. The terms announced late Tuesday confirmed creditors' fears that they would sustain heavy losses.
Even as he pledged to try to limit the damage to investors, acting Prime Minister Viktor Chernomyrdin was careful to dissociate himself from the restructuring decision.
"I would like people to understand us correctly: This decision was predetermined. In actual fact, our task was only to formulate it, and we could not do otherwise," he was quoted as saying by the ITAR-Tass news agency.
In Washington, meanwhile, the Clinton administration was distancing itself a bit from Yeltsin -- just in case.
In a 30-minute phone call to the Russian president this morning, President Clinton limited his endorsement of Yeltsin to this message: "I'll continue to support you in what you need to do to tackle Russia's economic situation," a White House official said.
"The crisis in the country is only beginning," said Vyacheslav A. Nikonov, a former adviser to Yeltsin. "Obviously, not a single foreign investor in his sound mind will come to Russia after what was done to foreign lenders."
Some economists said Chernomyrdin's only hope in resuscitating the economy will be to print more rubles -- a move sought by the Communists but one likely to ignite the high inflation Russia has avoided in the recent past.
Chernomyrdin spent much of Tuesday negotiating with factions of the State Duma -- the lower house of parliament -- which will consider as early as Friday whether to confirm his reappointment.
Emerging from the meetings, the former Soviet boss called for a "government of accord," signaling he may be willing to include in the Cabinet representatives of the anti-Yeltsin parties that dominate the Duma.