RUSSIAN CRISIS OVER…UNTIL NEXT TIME.

The Central Bank managed to sell 5.8 billion (US$950 million) worth of treasury bills on Wednesday June 3, averting the feared market meltdown. However, the government did have to draw down its reserves to buy an additional 2.6 billion rubles of bonds falling due which the market would not absorb. (New York Times, Russky telegraf, June 4)

Four- and 12-month bonds were sold at 54 percent interest, down from the peak of 80 percent that they hit last week, though the Central Bank appears to be keeping its refinance rate at a daunting 150 percent for the time being. Eurobonds–US$1.25 billion of them–are also being floated this week. The government will have to continue refinancing about US$1 billion of bonds each week through the remainder of the year. Moscow’s permanent financial high-wire act stems back to the government’s conscious decision, in the wake of the October 1994 “Black Tuesday” ruble crash, to finance budget deficits through borrowing and not through printing money. It is a Procrustean Bed of their own making, given their inability to get revenues and spending in line. (Novaya gazeta, June 1)

The decisive factor in calming the market and, more importantly, causing the media hysteria to subside was the June 2 meeting between President Boris Yeltsin and the eleven leading businessmen. Details of the meeting have not leaked out: The mere fact that it took place, and that the atmosphere was one of calm and mutual respect, is considered decisive. This is the third such gathering Yeltsin has held with the Russian oligarchs–the predecessors being the March 1996 meeting, when he asked for their support in the presidential election, and the less successful the September 1997 meeting, when he called on them to cease their internecine war. However, the fact that the crisis has stabilized does not mean that Russia’s deep structural problems are in remission. (Kommersant Daily, June 3)

UNSCOM REPORT CRITICIZES IRAQ.