Moscow clashes with republics over currency WAR IN THE GULF

January 25, 1991|By Scott Shane | Scott Shane,Moscow Bureau of The Sun

MOSCOW -- As panic and chaos set off by Soviet currency reform spread yesterday, the order to withdraw 50- and 100-ruble notes from circulation by tonight became the latest cause for a clash between the republics and the central government of President Mikhail S. Gorbachev.

Two people were crushed to death in Leningrad in huge lines to exchange money, Russian Prime Minister Ivan S. Silayev reported. At least one elderly person died of a heart attack and several more fainted in Moscow lines. Riot troops were mobilized in several cities to control unruly crowds of people afraid they would lose their money.

There were reports of suicides by pensioners in despair over fear that they would lose their savings. In the wastes of Siberia, officials said, it could take a person days to get to a bank to turn in his money -- if indeed he got the word right away Tuesday night.

Several republics, including the Russian Federation, decided to extend the three-day limit for turning in 50s and 100s. Russia also raised the limit on no-questions-asked exchange of pensioners' savings from 200 rubles to 500.

But the Soviet government fired back with a strongly worded warning that the three-day limit must be strictly enforced. Any change in time limits or ruble limits set by the Gorbachev decree would be "a most flagrant violation of state and financial discipline," the statement from the State Bank said.

Any bank violating the order could have its license revoked, it added.

Alexander I. Gurov, a well-known investigator who heads the Ministry of Internal Affairs' fight against organized crime, said the decree was dealing a severe blow to black marketeers and others who had accumulated illegal millions.

He said it had even set off panic in labor camps, where prisoners scrambled to get word to contacts outside to try to turn in riches stashed away.

Mafia kingpins were traveling to regions where the deadline for exchanging money has been extended to try to find a way to preserve their wealth, he said. A number of factories and stores were caught trying to turn in large amounts of cash, much of it apparently provided by criminals for laundering, Mr. Gurov told Soviet television.

The decree permits pensioners to change up to 200 rubles in 50s and 100s and workers to change one month's pay, up to a maximum of 1,000. Larger amounts can be changed only if the person involved can prove the money was earned legally.

In addition, the decree limits to 500 rubles a month the amount of cash that can be withdrawn from savings accounts. Officials promise that large purchases will be possible using checks, but many people doubt that the procedure will be set up any time soon by banks where abacuses are still more common than calculators.

The goal of the currency reform is to cut the amount of money in circulation, and particularly the amount in the hands of criminals. Officials hope it will strengthen the feeble ruble and make future moves to free prices less explosive.

Yet the decree left republican officials deeply divided. Mr. Silayev, the Russian premier, and Russian President Boris N. Yeltsin both essentially approved the decree, though they decided to change details of its implementation.

But Georgy Matyukhin, the chairman of Russia's Central Bank, was scathing in a newspaper interview. He said most criminals knew the decree was coming and got rid of their big bills in plenty of time. He said the mechanism for carrying out the reform was poorly designed.

Gennady I. Filshin, a Russian deputy premier, went further. Noting that the decree authorizes the KGB and other union representatives to take control of republican bank branches if necessary, he said that it was a covert move to restore central control over the republics' finances.

For instance, the Russian Federation has agreed to pay far less to the union budget this year than in the past. But if the KGB takes over Russian banks, it will be able surreptitiously to reassert control over Russian revenues, Mr. Filshin said.

Lithuanian President Vytautas Landsbergis denounced the decree as "robbing the people and confiscating their savings." Armenian Prime Minister Vazgen Manukyan said the decree would "undermine people's faith in the authorities." A Georgian official called the move "financial aggression."

At the Moscow Central Telegraph office, customers lined up to use 50s and 100s to buy money orders and wire money to relatives and even to themselves. When the wires arrive, the recipients plan to demand payment in 25- or 10-ruble notes.

Clever people likewise flocked to the railway stations, buying tickets with big bills to distant locations. They plan to turn the tickets in later for refunds.

But the black marketeers' confidence that they could beat the system was declining. If on Wednesday morning they were buying 100-ruble notes for 50 rubles in smaller bills, confident they would be able to unload the 100s somehow, by yesterday afternoon 100s could be purchased for a mere 10 rubles.

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