U.S. Weighs Action Amid Russia Woes

WASHINGTON —  As prospects for Russia’s tattered economy worsened Wednesday, the Clinton administration hinted that the United States might be willing to provide more temporary aid if the crisis there escalates.

The White House said President Clinton met with several key economic advisors to discuss the Russian situation as a senior Treasury official arrived in Moscow to discuss possible remedies.

So rapidly is the financial picture there deteriorating, U.S. officials fear, that there may not be time for Moscow to deal with it before the second installment of a $22.6-billion international rescue package assembled for Russia can be disbursed.

The Russian ruble sank against the U.S. dollar on Wednesday after the Russian central bank caused a panic in the nation’s financial markets by attempting to limit the amount of dollars that it would set aside to defend the ruble in the foreign exchange markets.

Some analysts worry that Russia soon may be forced to devalue the ruble--a step that would worsen its economic plight by increasing its debt to foreign investors and commercial banks.

Financier George Soros said Wednesday that Russia’s financial markets have “reached a terminal phase” and called for a devaluation of the ruble, suggesting the introduction of a currency pegged to the dollar or euro.

In a letter to the Financial Times, Soros recommended a currency board as “the most efficient way to stabilize the situation.” He said Russia would need $50 billion of reserves to back a currency board, whereby it would be committed to exchanging rubles for dollars or euros at a set rate.

Clinton is scheduled to visit Moscow on Sept. 1 for three days of meetings with Russian President Boris N. Yeltsin. The meetings will be their first since they talked in Birmingham, England, in June.

The White House declined Wednesday to provide any details about what Clinton and his economic advisors might be considering. P.J. Crowley, spokesman for the National Security Council, said that “much of [the] meeting” was devoted to Russia.

Crowley appeared to leave open the possibility that Washington would consider providing additional help if the situation in Russia worsened. “I can’t predict at this point,” he said.

The financial situation in Russia has been worsening for weeks as foreign investors were disappointed by the government’s seeming inability to carry out promised economic reforms that analysts say are necessary to restore economic health.

In another blow to the government’s efforts to stabilize the economy, leaders of the Communist-dominated Duma, the lower house of parliament, announced Wednesday that they would refuse to call a special session to approve an austerity program.

Although the Duma’s speaker, Gennady Seleznyov, had promised last week that the legislature would meet on Aug. 19 and 20 to consider 17 draft measures, Deputy Speaker Sergei N. Baburin said Wednesday the measures were “not urgent” and could “wait until autumn.”

The reforms were demanded by the International Monetary Fund in return for its $22.6-billion bailout package. The IMF has already approved an initial installment of $4.8 billion and is scheduled to release an additional $4.3 billion in early September.

Besides the adverse news from the Duma, the markets were jolted by the Russian central bank’s announcement that it is cutting the maximum quotas of dollars that it would sell to commercial banks.

Although Russian officials said the action was aimed at limiting its risk in deals with the banks, traders saw it as a desperation move provoked by the rapid depletion of foreign exchange reserves as Russia has defended the ruble over the last few days.

As a result, the ruble sank further, while the Russian stock market index dropped a hefty 1.6%, after a 9% drop on Tuesday.

Despite Wednesday’s assault on the ruble, Russian Finance Minister Mikhail M. Zadornov insisted that the government could still avoid a full-scale devaluation. “If we thought that devaluation was unavoidable, we would not be taking the measures we are taking now.”

The Treasury’s senior international economic official, Undersecretary David Lipton, arrived in Moscow for consultations with his Russian counterparts, but U.S. officials declined to comment on what issues he may have discussed.